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Business News/ Companies / News/  PNB looking to raise Rs5,000 crore next fiscal
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PNB looking to raise Rs5,000 crore next fiscal

Board nod received, investment bankers pitching for mandate for raising capital mostly via QIP route

‘We will be raising the money in two or three tranches through QIP and through the market. We will be appointing bankers only by March,’ said Ram Sangapure, executive director of Punjab National Bank. Photo: Pradeep Gaur/MintPremium
‘We will be raising the money in two or three tranches through QIP and through the market. We will be appointing bankers only by March,’ said Ram Sangapure, executive director of Punjab National Bank. Photo: Pradeep Gaur/Mint

New Delhi: Punjab National Bank (PNB) is planning to raise as much as 5,000 crore by selling shares in the year starting 1 April, according to four people familiar with the development, including three investment bankers who had met the state-owned lender to seek a mandate.

“We have a board approval to raise 5,000 crore and have called for an extraordinary general meeting (EGM) in March for shareholder approval, and we expect the fundraising process may happen only in the new financial year," said Ram Sangapure, executive director of Punjab National Bank.

Investment bankers have been meeting officials of the state-run bank, pitching for the mandate for raising this capital mostly through a qualified institutional placement (QIP).

“We have given our pitch and we understand that they would be hiring the banks by February-mid week," said an investment banker, who had met PNB officials in January.

“Most state-run banks are waiting for one big issuance to happen and road shows are beginning to happen, and once one issue is picked up, it will be easier to close other ones," said the second person cited above, who is advising two public sector banks on QIP issuances.

“We will be raising the money in two or three tranches through QIP and through the market. We will be appointing bankers only by March," added Sangapure.

In September 2014, PNB had approved a five-for-one stock split, a move that would make the stock more affordable to small investors. It had then informed the bourses that it has approved raising funds through a qualified institutional placement (QIP) or a follow-on public offer (FPO) or a rights issue, which will be used for meeting Basel-III capital requirements and general business needs.

In December, the government appointed managing directors and chief executive officers for four state-owned banks. However, for PNB, Bank of Baroda and Canara Bank, the government plans to go in for a fresh selection process and widen the search.

Under Basel-III norms, being implemented in phases between April 2013 and March 2019, banks need to have a core capital ratio of 8% and a total capital adequacy ratio of 11.5%.

Public sector banks are queuing up to raise capital through QIPs or through offer-for-sale route. On 27 January, State Bank of India (SBI) announced it is looking to raise 15,000 crore from markets. The bank’s chairman Arundhati Bhattacharya indicated that it wants to keep approvals in place so that it can raise capital whenever the markets are conducive and meet its growth needs.

Bengaluru-based Canara Bank has already hired investment banks to raise capital through a QIP. Its first set of road shows during December did not get a favourable response from investors. Oriental Bank of Commerce (OBC) has also hired investment banks to raise nearly 1,500 crore. Union Bank of India has also reiterated its plans to raise 1,386 crore from the market.

Stressed assets across the Indian banking system stood at 10.7% at the end of September 2014, according to RBI’s financial stability report, released in December 2014. Bad loans in state-owned banks were 12.9% of overall loans, much higher than 4.4% at private banks.

State-owned banks will need between 1.5 trillion and 2.2 trillion in additional capital by 2018-19 to meet international capital requirements set under the Basel-III norms, according to a Moody’s report released in September 2014.

“Raising large QIPs worth 5,000 crore will not be an easy journey for the bank and possibly, the stock price could be subdued for the same reason. Though there is some improvement in outlook in the sector, but probably 12 months down the line, capital raising environment would be better," said Vaibhav Agarwal, vice-president of research at Angel Broking Pvt. Ltd.

“As far as non-performing assets are concerned, there is some plateauing of assets. Even though there was an increase in net NPAs of state-owned banks but if we compare the first half of the quarter, the deterioration is not as much as we have seen in both financial year 2014 and 2013," Agarwal added.

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Published: 02 Feb 2015, 12:38 AM IST
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