Government Plans to Utilize Green Shoe Option for 6% Divestment in Bank of Maharashtra Following 400% Over-Subscription

India Exercises Green Shoe Option in Bank of Maharashtra Share Sale, Signaling Strong Investor Confidence

new Delhi, december 2, 2025 – The Indian government today announced it will proceed with the full exercise of the green shoe option in its offer-for-sale (OFS) of Bank of Maharashtra (BoM) shares, following an overwhelmingly positive response from investors. The move will see a total divestment of 6% of BoM’s paid-up capital, raising approximately ₹2,492 crore (approximately $30 million USD).

The OFS, initially offering a 5% stake with a 1% green shoe option, garnered subscriptions exceeding 400% of the base size on its first day, specifically within the non-retail investor segment. This robust demand triggered the exercise of the green shoe option, allowing the government to sell an additional 1% stake.

“Offer for sale in Bank of Maharashtra received overwhelming response in the markets today. The issue was subscribed to 400 per cent of the base size. The government has decided to exercise the green shoe option,” stated Arunish Chawla,Secretary of the Department of Investment and Public Asset Management (DIPAM),via a post on X (formerly Twitter).

The floor price for the OFS was set at ₹54 per share, a 6.34% discount from BoM’s closing price of ₹57.66 on Monday. the strong subscription rate indicates significant investor confidence in both Bank of Maharashtra and the broader Indian banking sector.

Financial Services Secretary M Nagaraju highlighted this sentiment, stating the notable bids reflect “strong investor confidence in the public sector banks and robustness of the Indian banking sector.”

Retail investors will have the chance to bid on Wednesday, December 3rd, 2025. The government is encouraging eligible investors to participate, emphasizing the potential for value creation from this public asset.

This divestment is also crucial for Bank of Maharashtra to meet Minimum Public shareholding (MPS) norms. Currently, the government holds a 79.60% stake in the Pune-based bank. The successful OFS demonstrates the government’s commitment to unlocking value in public sector undertakings and strengthening the Indian financial landscape.

What are the potential benefits of the Green Shoe Option for the Bank of Maharashtra divestment?

Government to Leverage Green Shoe Option for Bank of Maharashtra Divestment

The Indian government is moving forward with its plan to offload a 6% stake in Bank of Maharashtra, bolstered by a remarkable 400% over-subscription during its recent Offer for Sale (OFS). A key component of maximizing returns from this divestment is the planned utilization of the Green Shoe Option,a standard underwriting practice in initial public offerings (IPOs) and follow-on public offerings (FPOs). This article delves into the specifics of this move, its implications for investors, and the broader context of the government’s disinvestment strategy.

Understanding the Green Shoe Option

The Green Shoe Option,also known as the over-allotment option,allows underwriters to sell more shares than initially authorized – up to 15% of the original offering – if demand exceeds expectations. This is crucial in scenarios like the Bank of Maharashtra OFS, where investor appetite considerably outstripped the available shares.

Here’s how it effectively works:

* Initial Offering: The government initially offered a 6% stake.

* Over-Subscription: Demand reached 400%,indicating strong investor interest.

* Green shoe Activation: The government, through its underwriters, can now sell up to an additional 9% (15% of 6%) of bank of Maharashtra shares.

* Stabilization Mechanism: If the share price falls below the offer price after listing, the underwriters can purchase shares in the open market to stabilize the price, using the shares acquired through the Green shoe Option.

this mechanism benefits both the government and investors by ensuring a smoother price finding process and perhaps preventing a significant post-listing price drop. Equity divestment benefits from this stabilization.

Bank of Maharashtra OFS: Key Details & Investor Response

The OFS of Bank of Maharashtra garnered ample interest from a diverse range of investors, including:

* Retail Investors: A significant portion of the shares were reserved for retail investors.

* institutional Investors: Qualified Institutional Buyers (QIBs) showed strong participation.

* Non-Institutional Investors: this category also contributed significantly to the over-subscription.

The 400% over-subscription rate highlights the positive sentiment surrounding Bank of Maharashtra’s performance and future prospects. Factors contributing to this include:

* Improved Financial Performance: Bank of Maharashtra has demonstrated consistent advancement in key financial metrics.

* Asset Quality: The bank has actively managed and reduced its non-performing assets (NPAs).

* Government Support: Ongoing government support for public sector banks (PSBs) has instilled confidence in investors.

* Banking Sector Outlook: the overall positive outlook for the Indian banking sector.

Implications of Utilizing the Green Shoe Option

Activating the Green Shoe Option has several key implications:

* Increased Divestment Proceeds: The government stands to generate higher revenue from the divestment.

* Enhanced Market Stability: The option helps stabilize the share price in the immediate aftermath of the OFS.

* Wider Shareholder Base: The increased number of shares available can lead to a broader shareholder base.

* Positive Signal to the Market: Demonstrates confidence in the bank’s valuation and future growth potential. Share market analysis will be closely watching this.

Government’s Disinvestment Strategy & PSU Bank Privatization

The Bank of Maharashtra divestment is part of the broader government strategy to reduce its stake in Public Sector Undertakings (PSUs) and raise funds to finance infrastructure progress and social welfare programs. The government aims to achieve its disinvestment targets through various methods, including:

1. Offer for Sale (OFS): Selling shares directly to the public.
2. Initial Public Offerings (IPOs): Listing previously unlisted PSUs.
3. strategic Disinvestment: Selling controlling stakes to private investors.
4. Exchange Traded Funds (ETFs): Creating ETFs comprising PSU stocks.

The long-term goal includes potential **