Central Bank of India Shares Available for Public Purchase Through Offer for Sale

Government's OFS of Central Bank of India Subscribed 2.3 Times

The Offer for Sale (OFS) of Central Bank of India has witnessed a strong institutional investor response, with the institutional portion of the OFS being subscribed to more than 2.3 times. Non-retail investors placed bids worth over ₹2,380 crore at an indicative price of ₹31.01 per share, significantly surpassing the 32.58 crore shares on offer. The government is selling a 4% stake in the lender, with a greenshoe option to divest an additional 4%, at a floor price of ₹31 per share.

The stake sale is aimed at improving public shareholding in line with SEBI regulations, which require all listed companies to maintain a minimum public float of 25%. The government currently owns 89.27% of the bank, and its holding would decline to 81.27% if the greenshoe option is fully exercised. The OFS marks the government's first stake sale in the current fiscal year, with a target of mobilizing ₹80,000 crore through PSU disinvestment and asset monetization.

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The government's stake sale is part of its broader disinvestment strategy, which includes the OFS of Bank of Maharashtra and Indian Overseas Bank in FY26. In FY26, the Centre raised ₹2,624 crore through the OFS of Bank of Maharashtra and ₹1,419 crore through the OFS of Indian Overseas Bank. For the current fiscal, the government has set a target of mobilizing ₹80,000 crore through PSU disinvestment and asset monetization, significantly higher than the revised estimate of ₹33,837 crore for FY26.

Expert Opinion

Sunny Agrawal, Head of Fundamental Research at SBI Securities, advises investors to avoid participating in the OFS, citing concerns over margin pressure and recovery from written-off accounts. Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund, also recommends investors to skip the OFS, highlighting the risk of NIM compression and earnings deceleration.

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Gulati further explains that the government still owns 81%+ of the bank, even after the OFS, and SEBI's limit is 75%. This means that at least 2-3 more rounds of stake sales are baked into the future, which could impact the stock's price. PSU banks with 80%+ government ownership have never commanded P/B multiple expansion, and Central Bank trades at 0.85x P/B, which is unlikely to change in the near future.