BoI plans mega QIP in a return to capital markets for govt banks

The last time public sector banks tapped the equity market for funds was in December 2017, when Punjab National Bank, Union Bank of India, Syndicate Bank and Bank of Maharashtra raised funds through their respective qualified institutional placement offerings (QIPs).

“Bank of India is gearing up to initiate the fundraise after the Union budget and their December quarter results," one of the two people cited above said on condition of anonymity. “They have had a few large recoveries in the last quarter, including recoveries from the Essar Steel account, and that should improve their numbers, thus boosting investor sentiment." Bank of India could also increase the deal size if investor appetite is strong, the person added.

The bank’s board is expected to announce the December quarter results on 31 January, according to filings with the stock exchanges.

The lender is being advised by Yes Securities, the investment banking arm of private sector lender Yes Bank, the second person said, also requesting anonymity.

Bank of India and Yes Securities declined to comment on queries sent by Mint.

In the September quarter Bank of India swung to a profit of ₹266 crore from a loss of ₹1,156 crore in the year-ago period. The bank’s net interest margin widened to 2.99% in the September quarter from 2.27% a year earlier.

Net non-performing assets declined to 5.87% in the September quarter from 7.64% in the previous year. The bank wrote off bad loans worth ₹2,498 crore during the quarter, while bad loan recovery stood at ₹966 crore.

State-run banks haven’t been active on the equity fundraising front and have rather depended on the government to infuse capital. However, private sector banks have been busy on the QIP front. Last month, RBL Bank raised ₹2,025 crore through a QIP, selling shares to various institutional investors, including Bajaj Finance Ltd.

In September, Axis Bank Ltd raised ₹12,500 crore from Singapore’s sovereign wealth fund GIC and US investors T Rowe Price and BlackRock, in the second-largest QIP share sale by an Indian bank, Mint had reported. Yes Bank had also tapped the QIP market for ₹2,000 crore in August.

State Bank of India’s ₹15,000 crore QIP in 2017 is the largest such share sale by an Indian bank till date.

Last year, 11 companies raised ₹35,238.14 crore through QIPs, while 25 companies had raised ₹16,587.43 crore in 2018, shows data from primary market tracker Prime Database.

QIP is a tool used by listed companies to sell shares or other securities, which are convertible into stocks, to qualified institutional buyers such as mutual funds.