Public sector lender IDBI Bank is the latest bank to line up a plan to raise money from the capital market to strengthen its resources and lending capability for long-term business growth.
The bank plans to raise R4,000 crore of equity
capital, which will help it improve its capital-adequacy ratio that stood at 11.68% for the fiscal ended March 2014.
"The board of directors of the bank, at its meeting on June 7, 2014, granted in-principle approval for the proposal to raise equity capital to the extent of R4,000 crore through qualified institutional placement (QIP) or follow-on public offer," IDBI Bank said in a BSE release on Saturday.
HDFC Bank (R10,000 crore), Syndicate Bank (R1,500 crore) and Union Bank (R1,386 crore ) are some other banks that have received board approval to raise equity capital through various modes and would seek shareholders' approval at respective annual general meetings.
IDBI Bank's planned issue will be one of the biggest in the recent times. State Bank of India, in January 2014, came out a R9,500-crore QIP, but managed to raise R8,032 crore, overtaking Axis Bank's R4,726-crore QIP issue in January last year. Recently, on May 30, Yes Bank closed a R2,942-crore (or $ 500 million) QIP issue that was subscribed five times, generating an aggregate worldwide demand of $2.5 billion.
The equity issue would help the lender — which has seen its net NPA ratio deteriorate from 1.58% as at end of fiscal 2013 to 2.48% at end of March 2014 — to shore up its tier-I capital that stood at 7.79% as at end of March 31, 2014. The IDBI Bank scrip, after rising as much as 3.6% in the morning, closed the day flat at R112.45.