Private sector lender DCB Bank Ltd is looking to raise as much as Rs400 crore through a qualified institutional placement (QIP) in the later half of the current quarter, said two people aware of the development.
QIP is a capital-raising tool through which listed companies can sell shares, fully and partly convertible debentures, or any securities other than warrants that are convertible into equity shares to qualified institutional buyers.
“DCB Bank has started meeting investment banks for its proposed QIP and they are expected to hire at least a couple of banks to manage the QIP soon. The bank’s management is keen on tapping the market before the end of this quarter,” said one of the two people cited above, both of whom spoke on condition of anonymity as the talks are private.
The DCB stock has surged since the start of 2017 and this will allow the bank to raise capital at an attractive valuation, the person added.
DCB Bank’s stock has risen by 57% to Rs169.75 year to date. The bank reported a 25% profit growth to Rs51 crore in the third quarter of 2016-17. Net interest income grew 31% to Rs209 crore.
In its board meeting on 7 March, directors of the private sector lender approved a resolution to raise as much as Rs400 crore through a QIP.
The bank is currently in the process of seeking an approval for the same from its shareholders through a postal ballot.
Emails sent to DCB Bank on Wednesday were not answered.
DCB Bank last raised capital through a QIP in 2014, when it raised almost Rs250 crore.
DCB Bank’s plans come at a time when QIP issues have seen a revival after a lacklustre 2016. Seven companies have raised Rs9,108 crore through QIPs so far this year, according to data from primary market tracker Prime Database.
The quantum of capital raised through QIPs in the first three months of the year is already almost twice as much as that raised in the whole of last year. In 2016, 16 companies raised Rs4,712 crore, data shows.
“The stock market has performed well since the start of the year, rising by more than 10% so far. That movement in the market has resulted in investors again looking at QIP issuances. There is also a lot of liquidity available with domestic investors such as mutual funds,” said the second person cited above, also requesting anonymity.
Since the start of the calendar year, the benchmark Sensex has gained 12.5% to 29,927.34 points, as of closing on 6 April.
The increased QIP activity in 2017 has been boosted by large issuances such as those of private sector lender Yes Bank Ltd and Hindalco Industries Ltd.
Yes Bank raised Rs4,907 crore through its QIP in March. In April, Hindalco raised close to Rs3,300 crore.
Other companies that have raised funds through the QIP route this year include auto parts maker Minda Industries Ltd, state-owned lender United Bank of India, Sagar Cements Ltd and Mercator Ltd.