PNB floats Rs 5,000-cr QIP, sees 14% equity dilution

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Mumbai | Published: December 13, 2017 6:21:42 AM

State-run lender Punjab National Bank launched a Rs 5,000-crore fund-raising programme late on Monday evening through qualified institutional placement (QIP) of shares at a likely price of Rs 168 per share in a move that will shore up the bank’s capital adequacy ratio.

pnb qip, pnb qualified institutional placement, punjab national bank qualified institutional placementThe base size of the QIP is Rs 3,000 crore or 17.9 crore shares, with an option to retain an additional Rs 2,000 crore through issue of another 11.9 crore shares. (Reuters)

State-run lender Punjab National Bank launched a Rs 5,000-crore fund-raising programme late on Monday evening through qualified institutional placement (QIP) of shares at a likely price of Rs 168 per share in a move that will shore up the bank’s capital adequacy ratio (CAR). The base size of the QIP is Rs 3,000 crore or 17.9 crore shares, with an option to retain an additional Rs 2,000 crore through issue of another 11.9 crore shares. Shares issued under the QIP will account for 14% of the bank’s total share capital, if the entire 29.8 crore shares are issued. The Delhi-based bank, which is the country’s second largest public sector lender, said the floor price of the shares is Rs 176.35. “A discount of not more than 5%, or Rs 8.80 to the floor price is hereby approved,” Punjab National Bank said in a notification to the stock exchanges. DSP Merrill Lynch, Credit Suisse Securities (India), Goldman Sachs (India), HSBC Securities and Capital Markets (India), Kotak Mahindra Capital, Morgan Stanley (India) and PNB Investment Services are the book runners for the QIP. Analysts said the QIP, combined with the capital the bank has raised through selling its stake in PNB Housing Finance earlier this month, will strengthen the bank’s capital adequacy ratio. “PNB might seek another Rs 5,000 crore to Rs 10,000 crore from the government as a part of the government’s recapitalisation programme,” an analyst with a large brokerage said on condition of anonymity. Analysts are largely of the view that this fund infusion should see the bank comfortably through till the end of this fiscal, and most likely till the recapitalisation resources are received.

In late October, the Cabinet approved a Rs 2.11-lakh-crore recapitalisation plan for public-sector banks (PSBs). As per the two-year plan, Rs 1.35 lakh crore will be mobilised through the issuance of recapitalisation bonds and around Rs 58,000 crore by the dilution of government equity in the various PSBs. The government will provide a budgetary support of Rs 18,139 crore under the existing Indradhanush plan.

As per the global capital to risk norms, called Basel III capital regulation, that is being implemented by the Reserve Bank of India, banks will have to maintain a minimum common equity ratio of 8% and total capital ratio of 11.5% by March 2019. As of September-end, Punjab National Bank’s common equity tier 1 ratio stood at 7.67%, while the CAR stood at 11.56%.

Bengaluru-based Canara Bank is among several other PSBs also looking to raise capital. The bank plans to raise up to Rs 3,500 crore through a QIP, and is in the process of hiring merchant bankers for the same. The PNB issue follows on the heels of a QIP by Mumbai-based Union Bank, which recently raised Rs 2,000 crore. The PNB share closed at Rs 173.25, up 0.17% from its previous close, but at a discount of 1.6% to the floor price of the offer.

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