Shares of Bank of India (BOI) declined nearly 2% on February 17, 2025, during morning trade after the public sector lender (PSU) raised ₹2,690 crore through infrastructure bonds. The 10-year bonds were issued at a coupon rate of 7.5% per annum, with an overwhelming response from investors.
At 9:55 AM, Bank of India’s stock was trading at ₹97.30 per share on the BSE, marking a 1.92% decline.
Despite the fundraising success, the stock price fell, likely due to broader market trends and investor reactions to the bond issuance.
Bank of India’s Infrastructure Bond Issue Details
📌 Total Funds Raised: ₹2,690 crore
📌 Bond Tenure: 10 years
📌 Coupon Rate: 7.5% per annum
📌 Investor Demand: Oversubscribed by 5.90 times
📌 Total Bids Received: ₹8,850 crore
📌 Base Issue Size: ₹1,500 crore
Bank of India received strong investor interest, with total bids reaching ₹8,850 crore, making the issue oversubscribed nearly six times. The funds raised will be used for long-term infrastructure financing and affordable housing projects, aligning with RBI guidelines.
Market Reaction and Stock Performance
📉 Stock Movement on February 17, 2025:
- Opening Price: ₹98.75
- Intraday Low: ₹97.10
- Current Price at 9:55 AM: ₹97.30 (-1.92%)
While the successful bond issuance indicates strong financial backing, the stock price declined due to:
✅ Market-wide corrections impacting PSU bank stocks
✅ Concerns over the impact of additional debt on future interest costs
✅ Profit-booking by investors after recent stock gains
Purpose of the Fundraising
The ₹2,690 crore raised via infrastructure bonds will be used for:
✔ Long-term infrastructure project financing
✔ Affordable housing loans
✔ Strengthening the bank’s lending capacity
📌 Important Note: The funds are not allocated to a specific project but will support overall long-term financing requirements.
Q3 FY25 Financial Performance
📊 Key Financial Highlights (Q3 FY25 vs. Q3 FY24):
✅ Net Profit: ₹2,517 crore (+35% YoY)
✅ Net Interest Income (NII): ₹6,070 crore (+11% YoY)
✅ Net Interest Margin (NIM): 2.80% (vs. 2.85% YoY)
✅ Operating Expenses: ₹4,114 crore (vs. ₹3,653 crore YoY)
✅ Credit Cost: 0.39% (vs. 0.46% YoY)
✅ Slippage Ratio: 0.19% (vs. 0.26% YoY)
BOI delivered strong profitability growth, supported by:
✔ Lower bad loans
✔ Higher net interest income
✔ Better treasury income
Despite the higher operating expenses, the bank maintained healthy asset quality, boosting investor confidence.
Net Interest Income and Margins Analysis
Net Interest Income (NII)
Q3 FY25 NII: ₹6,070 crore (+11% YoY growth)
NII growth was driven by:
📌 Higher interest earnings from loans and investments
📌 Controlled growth in interest expenses
Net Interest Margin (NIM)
Q3 FY25 NIM: 2.80% (vs. 2.85% YoY)
Despite higher income, the NIM slightly declined due to:
🔻 Increased cost of funds amid rising interest rates
🔻 Higher deposit growth vs. lending growth
📌 NIM Outlook:
BOI expects NIM to remain in the 2.85-2.89% range for the current fiscal year.
Operating Expenses and Profitability
📊 Q3 FY25 Operating Expenses:
- ₹4,114 crore, up from ₹3,653 crore in Q3 FY24
- Lower than ₹4,355 crore in Q2 FY25
📌 Cost Pressures:
🔸 Higher employee costs
🔸 Technology investments
🔸 Branch expansion efforts
Despite rising expenses, BOI managed to boost its profitability through higher revenue streams and lower credit costs.
Asset Quality and Credit Performance
BOI reported strong asset quality improvement, with a lower slippage ratio and improved credit costs.
📉 Slippage Ratio: 0.19% (vs. 0.26% in Q3 FY24)
📉 Credit Cost: 0.39% (vs. 0.46% in Q3 FY24)
These improvements were driven by:
✅ Stronger loan recovery efforts
✅ Better credit monitoring
✅ Reduced fresh bad loans
The declining credit cost is a positive sign for long-term profitability and asset health.
Future Outlook for Bank of India
🔮 Growth Projections:
✔ Infrastructure Lending Expansion: BOI’s bond fundraising will help finance long-term infrastructure projects.
✔ Stable Net Interest Margins: The bank aims to maintain a NIM of 2.85-2.89% in FY25.
✔ Asset Quality Stability: The low slippage ratio and improving credit costs indicate strong risk management.
✔ Retail & Corporate Loan Growth: Increased lending in retail, SME, and corporate segments will drive future revenues.
📌 Key Challenges Ahead:
⚠ Rising borrowing costs may impact profitability
⚠ Market volatility affecting banking sector stocks
⚠ Macroeconomic risks such as inflation and interest rate hikes
Conclusion
Bank of India successfully raised ₹2,690 crore via infrastructure bonds, but its stock fell nearly 2%, reflecting investor caution.
📊 Q3 FY25 Financial Takeaways:
✔ Net profit surged 35% YoY to ₹2,517 crore
✔ NII grew 11% YoY to ₹6,070 crore
✔ Credit cost and slippage ratio improved significantly
✔ Operating expenses increased but remain under control
📈 Stock Outlook:
BOI remains a strong contender in the PSU banking space, with a focus on growth and stability. However, short-term price fluctuations may continue amid market volatility and global economic factors.
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