Analysts have advised retail investors to stay away from the government's ₹2,455 crore offer for sale (OFS) in Central Bank of India, with brokerages flagging concerns over margins and earnings visibility.
The Centre wants to sell up to an 8% stake, including a 4% base issue and an equivalent greenshoe option, in the OFS. The non-retail portion, amounting to 4% of the issue, was subscribed 2.35 times on Friday, prompting the government to exercise the greenshoe option to sell an additional 4%. The retail portion is set to open on Monday.
"We advise investors to avoid participating in the OFS. There are better opportunities in the PSU banking space," said Sunny Agrawal, head of Fundamental Research at SBI Securities.
He added that lower recoveries from written-off accounts and limited treasury gains could weigh on near-term profitability, despite recent operational improvements. The floor price is at ₹31 per share, a discount of about 8.6% to Thursday's closing price of ₹33.91. The stock fell 8% to ₹31.22 on Friday, making it the worst performer on the Nifty PSU Bank index. "While the steep discount may appear attractive, investors should remain cautious as further stake sales are likely to meet Sebi's 25% minimum public shareholding norms, creating a continued supply overhang," said Ankit Garg, Head of Equity at Wealthy Nivesh PMS.
The divestment is part of the government's plan to comply with public shareholding rules. As of the March quarter, the government held 89.27% in the bank, which could decline to 81.27% if the greenshoe option is fully exercised. However, it would still need to pare an additional 14.27% stake over time. Analysts said the bank's recent sharp drop in quarterly net profit could leave the stock vulnerable to post-OFS corrections.
