Mumbai: Federal Bank Ltd on Wednesday said it has launched a qualified institutional placement (QIP) offering that could see it raise up to Rs2,500 crore from institutional investors.
QIP is a capital-raising tool through which listed companies can sell shares, fully and partly convertible debentures, or any securities other than warrants that are convertible into stocks, to a qualified institutional buyer.
The QIP will be the sixth launched by a bank this year. In 2017, banks have dominated the QIP fundraising route, raising over Rs26,000 crore so far.
The year has seen record-breaking QIPs from banks such as public sector lender State Bank of India, which raised Rs15,000 crore earlier in June in the largest QIP in the country, and Kotak Mahindra Bank Ltd’s Rs5,803 crore offering, the largest ever by a private sector bank.
Other banks that have raised funds through this route in 2017 include Yes Bank Ltd, DCB Bank Ltd and United Bank of India. The strong fundraising interest from banks has driven the total QIP fundraising this year close to record highs. As per data from Prime Database, a primary market tracker, in less than six months, 13 firms managed to raise Rs31,406 crore through QIPs. This compares with Rs31,684 crore in all of 2014 and is just a couple of thousand crores short of the record Rs34,675 crore in 2009.
In a statement to stock exchanges, Federal Bank said it had set a floor price of Rs117.04 per share for the QIP. Shares of Federal Bank closed at Rs116.85 apiece, down by 1.81% on the BSE, while the benchmark Sensex closed almost flat at 31,283.64 points.
Federal Bank has seen its stock price increase by 75% since the start of the year, stock exchange data shows.
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The lender has appointed investment banks Citigroup Global Markets India Pvt. Ltd, Deutsche Equities India Pvt. Ltd, IIFL Holdings Ltd and Kotak Mahindra Capital Co. Ltd to manage the share sale.
The bank plans to use the proceeds of the share sale to grow its loan book.
“Subject to compliance with applicable laws and regulations, our bank intends to use the net proceeds towards augmenting our bank’s Tier I capital to support growth plans and to enhance the business of our bank, and for other general corporate purposes,” it said in its share sale prospectus filed with stock exchanges.
Federal Bank’s stock has been performing strongly, driven by its recent financial performance. For the quarter ending 31 March, the lender reported a profit of Rs257 crore, a significant jump from the Rs10 crore profit it reported in the same quarter last year. Total income during the period rose to Rs2,598.06 crore, from Rs2,262.94 crore a year ago.
The bank improved its asset quality, with net non- performing assets (NPAs) or bad loans easing to 1.28% of net loans as on 31 March 2017, from 1.64% at the end of March 2016. Gross NPAs stood at 2.33% of gross advances by the end of 2016-17, slightly down from 2.84% a year ago.