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The market expects Indian Overseas Bank to carry on much as it has.
At today’s share price, buyers are assuming Indian Overseas Bank earns about 14.9% a year on the money invested in it, from here on. Over the last ten years it actually earned about 13.9% a year. The two are close, so the share price does not need the business to improve or to stumble. It needs it to keep doing roughly what it already does.
- How it is valued: Excess return — the correct lens for a bank.
- What the price assumes: 14.9% return on equity, against 13.9% the model takes from its own record.
- Ten-year record: Between FY2019 and FY2026, Indian Overseas Bank's revenue went from ₹21,838 crore to ₹37,532 crore — it compounded at about 8% a year over 7 years.
- Biggest swing factor: Credit costs. Main risk: Small free float.
01A Chennai bank, almost fully state-owned
Indian Overseas Bank, founded in Chennai in 1937, is a public-sector bank in which the Government of India holds the overwhelming majority of shares, leaving a very small free float.
Heavy bad loans put it under the RBI's prompt corrective action framework from 2015 to 2021, limiting its lending. It has since rebuilt profitability.
02What the market is assuming
Work backwards from today's share price and you can see what buyers are quietly taking for granted. Here is the return on equity that price implies for Indian Overseas Bank, next to what the model assumes from the company's own record.
The further apart these two numbers are, the bigger the bet a buyer at today's price is making.
03Indian Overseas Bank's record, in plain numbers
Between FY2019 and FY2026, Indian Overseas Bank's revenue went from ₹21,838 crore to ₹37,532 crore — it compounded at about 8% a year over 7 years. It reported a net loss in FY2019 and FY2020, and closed the period with net profit of ₹5,208 crore. In FY2026 it kept 13.9% of revenue as net profit — its best year in the period. The latest year added 11.2% to revenue, well ahead of its own long-run pace.
Revenue and earnings per share in ₹, return on equity and leverage as ratios — all from the filed statements.
Revenue and net profit by year (₹ crore)
| Year | Revenue | Net profit | Margin |
|---|---|---|---|
| FY2019 | 21,838 | -3,738 | -17.1% |
| FY2020 | 20,712 | -8,527 | -41.2% |
| FY2021 | 22,525 | 831 | 3.7% |
| FY2022 | 21,641 | 1,709 | 7.9% |
| FY2023 | 23,523 | 2,104 | 8.9% |
| FY2024 | 29,731 | 2,666 | 9.0% |
| FY2025 | 33,750 | 3,396 | 10.1% |
| FY2026 | 37,532 | 5,208 | 13.9% |
04How Indian Overseas Bank gets valued — and why
Excess return — the correct lens for a bankA bank is not valued with a discounted cash flow. Deposits are its raw material and interest is operating income, so enterprise value means nothing here. It is valued on excess return instead — the profit it earns above the cost of the equity funding it.
05What decides Indian Overseas Bank's value
Credit costs
Lower provisions lift profit.
Loan growth
Freedom from restrictions allows growth.
Return on equity
Whether returns hold through a cycle.
Government stake sales
Selling down would increase free float.
06What could go wrong
- Small free float. Very few shares trade, which can distort the price.
- Asset quality. A new downturn would hurt.
- Capital. Growth may need fresh equity.
07What the full Indian Overseas Bank valuation shows
Sign in free to see the complete Indian Overseas Bank valuation
- ✓Fair value per share — from the excess-return model banks are valued on
- ✓The bank workpaper — book value, cost of equity and sustainable return, step by step
- ✓Bull, base and bear cases — and exactly which assumptions move between them
- ✓Peer comparison — against Bank of India, Union Bank and other state banks
- ✓Downloadable report — the full write-up, yours to keep
08Questions people ask about Indian Overseas Bank
What is prompt corrective action?
An RBI framework restricting weak banks; IOB was under it from 2015 to 2021.
Who owns Indian Overseas Bank?
The Government of India holds almost all of its shares.
Why does IOB's free float matter?
With few shares trading, prices can move far from fundamentals.
Is Indian Overseas Bank overvalued?
At ₹32 the market is pricing in roughly 14.9% sustained ROE, against the ~13.9% its own record supports. That is close to what it has delivered, so the price is broadly consistent with the company simply continuing as it has.
What is the intrinsic value of Indian Overseas Bank?
It is computed from the filed financial statements using the method that fits this business (excess return), with every assumption shown alongside the result. The per-share figure and the full working are in the report.
How much debt does Indian Overseas Bank carry?
Debt to equity stands at 2.91, down from 3.51 at the start of the period — the balance sheet is a core input to the cost of capital used here.