Govt To Divest 6% In BoM After 400% OFS Demand

The Indian government announced it will exercise the “green shoe” option and divest a total of 6 per cent stake in Bank of Maharashtra (BoM) through an Offer-for-Sale (OFS). The base offer was 5 per cent, but investor demand of 400% of the base size triggered an additional 1 per cent sale. The floor price for the OFS is fixed at ₹54 per share, and total proceeds are expected to be about ₹2,492 crore, assuming the floor price. The OFS opens for non-retail investors first, with a retail window scheduled to open on 3 December 2025. Does this move offer a buying opportunity, and what key factors should market participants watch?

Government's Divestment Timing And Subscription Strength Explained

The government owned 79.60% equity of the bank prior to the sale but plans to dilute its stakes in BoM to meet minimum public shareholding requirements. The OFS will assist in reducing government shareholding to less than 75% in accordance with regulatory provisions.

Investor response was very strong. Within a short time on Day 1, bids reached four times the base offer size. This reflects considerable demand for PSU bank stock, likely driven by expectations of improved bank performance and the attractive offer price (a discount of ~6.3% vs previous close). The strong subscription underlines market confidence in BoM’s recent financial performance and potential for capital-market gains post-divestment.

Given this demand, what could the sale mean for stock liquidity and shareholding structure?

How The Stake Sale May Change In Shareholding, Liquidity, And Valuation

Once completed, the public float for BoM will increase significantly. More public shareholders means improved liquidity and trading volume. This change may help reduce volatility and make it easier for institutional and retail buyers to enter and exit positions.

In terms of valuation, broader popularity, as a result of greater ownership by the general population, might bring higher scrutiny by analysts and investors over time, leading to better market valuation quantities. The low price at which shares will be sold, compared to the recent price of ₹57.65, serves as a cushion to early investors in the event of a reversal in prices.

Nevertheless, after sales, the valuation will be based on business performance. Recently, BoM announced an increase of 23% in net profit year-on-year in Q2 FY26 due to increased interest income and reduced bad-loan ratios. Its gross non-performing assets (NPA) ratio declined to 1.72 percent and net NPA to 0.18 percent compared to 1.84 percent and 0.20 per cent of last year. These are good indicators of asset quality.

Thus, the sale will improve structural factors. But what will determine stock outlook post-divestment?

What To Watch: Key Factors For Bank Of Maharashtra's Stock

First, the success of the OFS allocation during the retail window will matter. If oversubscription continues and allotments get completed smoothly, the increased public float may hold.

Second, future quarterly performance will be significant. Positive trajectories in the valuation will be maintained by a steady increase in net interest income, consistent asset quality and regulated cost of credit.

Third, bigger PSU-bank mood and macro environments, like interest-rate dynamics, credit demand and regulation landscape, can affect investor appetite.

Lastly, the post-OFS stock trade will provide guidance. Keeping a check on trading volumes, price stability, and changes in institutional holdings will be a gauge of whether the divestment has achieved success in enhancing liquidity and bringing in long-term investors.

When executed successfully, the divestment would provide a fresh entry option to the medium-term investors. But can structural reforms and better public float be transformed into tighter business growth and better returns for Bank of Maharashtra?

Sources:

The Economic Times
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The Economic Times