Indian Overseas Bank Tumbles 6.45% After Govt Opens Stake Sale of Up to 3% Through OFS

Mumbai, December 17, 2025: The shares of Indian Overseas Bank (NSE: IOB) came under heavy selling pressure on Tuesday following the announcement by Government of India to divest up to 3% stake in the state-owned bank through Offer for Sale. 

Up to 3% Equity Sale Triggered as Govt Expedites Compliance With Shareholding Norms

According to the notice submitted by the regulator, the government as promoter of the IOB, proposes to offload not more than 38,51,31,796 shares, representing 2% of its paid-up equity, under the base offer. The issue will open for non-retail investors on 17 December 2025 and will then be available for retail investors, employees and eligible non-retail investors extending their bids on 18 December 2025.

Further, the Centre has retained the option to oversubscribe to the extent of 1%, or 19,25,65,898 shares, thus making it 3% equity for the proposed divestment. The offer for sale will be conducted through a separate window facility on the BSE Limited Stock Exchanges and the National Stock Exchange of India (NSE).

OFS Structure Signals Fast Track Compliance on 25% Public Float Norm

Sale of stake will be done in line with SEBI norms which states that all listed companies, including public sector banks, must have a minimum public holding of 25 per cent. The period for this has been fixed at August 2026.

Currently, the government holds 94.61% shares in Indian Overseas Bank, which is far above the statutory limit. It complies with a divestment similar earlier this month. This time the Centre has divested 6% shares in Bank of Maharashtra, taking its holding below 75 per cent. Also, there are high government stakes in the Punjab & Sind Bank (93.9%), UCO Bank (91%) and Central Bank of India (89.3%), which keeps the PSU Banks in direct line of sight. 

Employee Reservations and ₹5 Lakh Limit Add to OFS Operating Complexity

In the case of OFS, the employees of the bank who are eligible to buy shares are allowed a maximum allotment of 1,50,000 shares, which is approximately 0.001% of its equity subject to certain approvals. It is clarified that employees can bid up to ₹5 lakh under this scheme.

The base offer, the overallotment scheme and the employees’ reservation scheme combined are designed to soak up the tightly timed divestment schedule to boost share ownership without diluting management control.”

Share Price Drop 6.45% in Response to OFS Offering

Share price of Indian Overseas Bank (IOB) continu͏ed to d͏ecline in the session after͏ ͏the news of ͏t͏he OFS. ͏The IOB share price closed at͏ ₹34͏.21͏ on the NSE on 1͏7 December 20͏25͏, do͏wn by͏ ₹2.͏36 or 6.45%. The ͏stock was closed at ₹35.80 wi͏t͏h an intraday͏ hi͏gh and low of ₹3͏5.80 and ₹3͏4.15͏ re͏spe͏ctivel͏y. The stock was closed at ₹35.80 with an intraday high and low of ₹35.80 and ₹34.15 respectively. The bank has a market cap of ₹66.14 thousand crores and a P/E of 14.94. At present, the stock is trading well below its 52-week high of ₹56.05 though near its 52-week low of ₹33.50.

The OFS being proposed by Government in Indian Overseas Bank is a measure to keep meeting the minimum public shareholding requirement target as it is trying to bring all PSBs under one umbrella. 2% base offer with a 1% option oversubscription) is a clear assurance on divestment quantities and timelines without diluting promoter control, more so before the year 2026 deadline.

Source: https://nsearchives.nseindia.com/corporate/vipulr_16122025185511_NoticeOFS_IOB.pdf

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