Qualified Institutional Placement (QIP) would be the most preferred way and public sector banks are likely to take a call on taking this route after finalisation of their second quarter results, merchant banking sources said.
As many as five large banks, including SBI, PNB and BoB,
are likely to sell shares to institutional investors in the second half of this
fiscal as they look to shore up their capital base amid the coronavirus
pandemic impacting the economy.
Qualified Institutional
Placement (QIP) would be the most preferred way and public sector banks are
likely to take a call on taking this route after finalisation of their
second quarter results, merchant banking sources said.
According to the sources, banks
would get a better picture about their Non-Performing Assets (NPAs), one-time
loan restructuring and consequent ratings latest by the end of October.
Subsequently, banks can start
the process of deciding the time, quantum, appointment of merchant bankers and
other formalities, the sources said.
Four to five large banks like
State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and
Union Bank of India would look at raising capital towards the end of third
quarter or during the fourth quarter of this fiscal, they added.
Further, the sources said these
banks have to plan capital raising in such a manner that there is no crowd out
of liquidity and enough space is available to both domestic and global
investors to participate in various QIPs.
PNB has already expressed its
intent to hit capital markets in the fourth quarter this fiscal to raise funds
to help meet growth needs and regulatory requirements.
"We will be planning
(capital raising) somewhere around the end of third quarter or beginning of
fourth quarter. By this time, we would have declared two quarterly balance
sheet of the amalgamated entities," PNB Managing Director S S Mallikarjuna
Rao told PTI in June.
It is to be noted that private
sector banks, including ICICI Bank, Axis Bank and Kotak Mahindra Bank, have
already mobilised capital thr0ugh QIPs in the last three months.
In a precursor to capital
raising exercise, most of the public sector bankshave already got shareholders'
approval for raising capital through a mix of debt and equity route in the
current fiscal.
For example, shareholders of
SBI have given approval for raising Rs 20,000 crore through public issue or
private placement of shares while PNB has received shareholders' nod for
mopping up Rs 7,000 crore.
BoB and Union Bank of India too
have approvals from their respective shareholders for raising Rs 9,000 crore
and Rs 6,800 crore, respectively, by way of common equity capital through
various modes, including QIP.
During the current fiscal,
banks might be required to raise capital based on the assumptions of growth in
Risk Weighted Assets (RWA) and ploughing back of profits.
As far as raising capital
through Tier I and Tier II bonds are concerned, SBI recently raised Rs 8,931
crore by issuing Basel III-compliant bonds to investors.
PNB garnered Rs 994 crore
by issuing Basel III-compliant bonds on private placement basis while BoB
raised Rs 981 crore by issuing additional tier-1 bonds.
Source – Moneycontrol.com
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