State-run banks line up QIPs to boost capital

Public sector banks are lining up equity offerings including qualified institutional placement (QIP) issues for the current financial year in a bid to boost their capital adequacy for the Basel-III norms.

Central Bank of India wants to raise ~2,800 crore while Dena Bank is planning to raise ~500 crore. According to the finance ministry annual report (201415), the government has given approval to 23 public sector banks to raise capital through either QIP, follow on public offer (FPO) or rights issue to meet their additional capital requirements.

During the current financial year, Dena Bank is looking for capital of ~500 crore by way of QIP. “It will be done at an appropriate time and the preference will be for QIP,” said Gian Chand Garg, general manager (financial management), Dena Bank.

The capital adequacy ratio of Dena Bank under Basel-III norms stood at 10.93 per cent on March 31, 2015 compared to 11.14 per cent a year ago. The Tier-I capital of the bank was at 7.67 per cent compared with 7.43 per cent a year ago.

Central Bank of India plans to go for either QIP or FPO. “We plan to raise ~2,800 crore through FPO or QIP in the current financial year and we are appointing merchant bankers for this,” said R K Goyal, the executive director of the bank last week.

The bank’s common equity in Tier-1 according to Basel-III norms stood at 7.86 per cent on March 31 compared to 6.47 per cent a year ago. The capital adequacy ratio, on the other hand, stood at 10.9 per cent compared to 9.87 per cent a year ago. State-owned Syndicate Bank will raise up to ~5,550 crore from a mix of equity and bond to meet its capital requirements. Its board has approved raising of equity capital of ~2,000 crore by way of QIP or rights issue or FPO or any other mode approved by the Reserve Bank of India or the government.

Besides, the bank’s board has also approved raising of up to ~1,800 crore by issuing Basel-III-complaint additional tier-I bonds, the bank said in a filing on the BSE.Syndicate Bank has also proposed to raise up to ~1,750 crore from Tier-II bonds.

Karthik Srinivasan, cohead, financial sector rating, ICRA, said those public sector banks with a strong profile will be able to place equity with investors — be it retail or institutional. The challenge is for weak public sector banks. They will find it difficult to raise money in the present environment. The public sector banks are facing asset quality and profitability pressures.

The public sector banks will need about ~21,00022,000 crore of equity capital in 2015-16, according to ICRA estimates.

In fact India’s largest lender is also planning to come up with QIP issue. In February 2015, State Bank of India took shareholders’ nod to raise up to ~15,000 crore by issuing equity shares through FPO, QIP and global offering.