Punjab National Bank plans $898 million capital raise via QIP, exclusively for institutional investors

In December, Punjab National Bank's board approved a plan to raise 75 billion through equity capital. This capital increase will be achieved through a QIP, which targets institutional investors and does not extend offers to the general public

Livemint, Written By Shivangini
First Published10 May 2024
Atul Kumar Goel CEO and MD of Punjab National Bank
Atul Kumar Goel CEO and MD of Punjab National Bank

Punjab National Bank (PNB), one of India's major state-run lenders, is set to complete a significant share sale to institutional investors within the next six months, Chief Executive Officer Atul Kumar Goel has said. 

The move is part of an effort to bolster the bank's capital reserves, Goel told Reuters in an interview.

In December, the bank's board approved a plan to raise 75 billion rupees (approximately $898 million) through equity capital. This capital increase will be achieved through a Qualified Institutional Placement (QIP), which targets institutional investors and does not extend offers to the general public, Reuters reported.

"For the QIP, we are trying to get all the approvals, but within six months we will try to raise the money from the market," Goel told the newswire. 

The announcement comes at a time when banks across India are seeking to enhance their capital bases to accommodate an increasing demand for loans. This trend is reflected in the activities of other major banks, including the State Bank of India, which is also considering raising equity capital.

Looking ahead to the financial year 2025, Goel forecasted that PNB's loan growth would hover between 11% and 12%, a slight increase from the 11.2% year-on-year growth observed from January to March. The bank also aims to boost its deposit growth to 9%-10% for the fiscal year, up from nearly 7% growth in the previous quarter, he told Reuters.

On the corporate front, Goel highlighted a robust loan pipeline of approximately 1 trillion rupees, with 600 billion to 700 billion rupees already sanctioned.

Amid these developments, PNB reported more than doubling its net profit in the January-March period, aided by a decrease in loan-loss provisions. The bank is focused on further improving its asset quality in the 2024-25 fiscal year, with bad loan recoveries expected to reach around 180 billion rupees. Goel also aims to reduce the gross and net non-performing asset ratios to below 5% and 0.5%, respectively, by March 2025, as per the report.

In terms of expansion, PNB plans to open an additional 150 branches this fiscal year, Goel said.

Furthermore, Goel mentioned that Indian banks are poised to provide feedback on a central bank proposal that seeks to tighten regulations for infrastructure project loans. 

He reassured that the proposed guidelines would not adversely affect project financing and that the bank would be capable of adhering to these new rules if implemented.

(With inputs from Reuters)

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