Indian Overseas Bank will hit the capital market on September 5 with its Rs 240 crore (Rs 2.4 billion) public offer priced at Rs 24 per share, its chairman S C Gupta said in New Delhi on Friday.

Government holding in the Chennai-based bank will come down to 61 per cent after its second public offer, from the present level of 75 per cent, while the bank's capital base will go up to Rs 544 crore (Rs 5.44 billion) from the present Rs 444 crore (Rs 4.44 billion), Gupta told PTI.

The IOB board, which met in New Delhi on Thursday night, finalised the price of the issue at Rs 10 face value with a premium of Rs 14 per share based on the market trend. IOB scrip is now hovering at around Rs 27 on the Bombay Stock Exchange.

"We will be hitting the market on September 5. The bank will start its roadshow for the IPO from Monday in Mumbai," Gupta said.

He exuded confidence that the IPO will be over-subscribed by 5-6 times as the price has been deliberately pegged low to allow investors to gain from the investment.

Of the Rs 240 crore issue, IOB has reserved 10 per cent for its employees.

The lead managers to the issue will be SBI Caps, Kotak Securites, DSP Merrill Lynch, Alliance Capital and AK Capital.

The bank has already filed the offer document with Securities and Exchange Board of India.

"This will be our second public offer. The bank tapped the market first on September 2000 offloading 25 per cent government stake," Gupta said.

IOB also plans to return Rs 75 crore (Rs 750 million) worth of equity to the government. In that case, government holding will fall to 54 per cent, Gupta said.

IOB's capital adequacy ratio will go up to 12 per cent after the public offer from the present 11.30 per cent, Gupta said.

The bank is not offering a green-shoe option in its IPO, as it would lead to decline in government holding to below 51 per cent, he said.

It is mandatory for public sector banks to maintain a minimum 51 per cent government holding as laid down in the Banking Companies Act. The government intends to amend the Act for bringing down the limit to 33 per cent and enable banks to raise more capital required for expansion.

Gupta said IOB targets to increase its deposits and advances by 14-16 per cent this fiscal.