Indian Overseas Bank · risk themes across the available quarters.
Bear-case history
SMA2 rose from ₹3,646 crore (March 2026) to ₹4,246 crore despite total SMA declining. Management attributes this to normalization and points to 0.06% slippage ratio as evidence of asset quality soundness, but analyst raised concern about government-guaranteed accounts within this bucket.
PSLC commission of ₹863 crore contributed materially to profitability. Management claims these are recurring across last 8-9 quarters, but analyst explicitly questioned sustainability given one-time nature of some components. Recovery from technically written-off accounts (₹490 crore) also flagged as variable.
₹5,000 crore QIP planned for Q3/Q4 will dilute GOI's 96.44% stake significantly. Timing dependent on market conditions; multiple tranches planned. No clarity on exact dilution percentage or pricing methodology.
Total ECL requirement assessed at ₹3,000 crore; only ₹2,150 crore provided so far. Management committed to not using 4-year dispensation and completing provisioning this financial year, which may pressure future quarters' earnings.
Estimated additional provision requirement of ₹2,700-2,800 crore, though management expects to absorb via buffer without P&L hit.
Analyst raised concern; management stated no visible stress yet and borrowers have adapted.
CAR fell from 18.06% in Q1 to 17.94% in Q2, though management attributes it to profit not yet added to capital.
Overseas gross NPA is high at 8.5% due to legal delays in recovery; no timeline for resolution.
CASA ratio could fall if retail term deposit growth continues to outpace savings account growth, though management expects to maintain above 41%.
Government holding at 92.44% requires significant dilution to meet SEBI norms; ₹4,000 crore QIP planned but further OFS may dilute equity.
Bank created ₹800 crore additional standard provision and ₹1,500 crore ECL provision, which may normalize but could impact earnings if sustained.