Dena Bank raises Rs 400 crore via QIP
, ET Bureau|
Updated: Oct 11, 2017, 09.19 PM IST
MUMBAI: Public sector Dena Bank has raised Rs 400 crore by selling shares to a clutch of institutional investors in an attempt to shore up capital as the Mumbai based lender is beleagued by rising non performing assets (NPAs).
“The amount has touched Rs 400 crore. This was dominated by a broad section of investors including domestic mutual funds and insurance companies. Some bank treasuries have also bid for the stock because everyone thinks that this bank’s price is near the bottom and the upside will be substantial,” said a person familiar with the deal.
Dena will announce the final pricing of the issue on Friday. However this person said that the investors mostly bought the shares at the 5% discount to the Rs 30.73 per share floor price announced by the bank on Tuesday which works out to Rs 29.19 per share.
The bank’s shares ended at Rs 30.65 a share up 0.16% on Wednesday.
“Investors think that the potential for Dena shares to go to even Rs 50 per share or Rs 60 per share which will be a 100% gain are high. This was not the case with the other QIPs which had closed last month. That’s what attracted investors to this sale. Domestic investors dominated the sale and there was no single company which got more than 10%,” said the person quoted above.
Vijaya Bank raised Rs 700 crore in late August at around the Rs 66.36 per share floor price set by the bank. Before than SBI the largest bank in India had earlier raised Rs 15,000 crore in the biggest such sale in June.
The fresh capital will increase Dena’s capital adequacy ratio beyond 12% and the core Tier I ratio will improve to 7.65% from 7.28% at the end of June. “This capital along with the Rs 1000 crore the government will invest in the bank will last the bank for the next two years,” said this person quoted above.
The successful QIP means Dena has become the first bank under Reserve Bank of India (RBI’s) prompt corrective action to tap the equity market which means restricted dividend payments, branch openings, hirings and loans to companies rated below investment grade.
Dena’s net NPAs have deteriorated sharply from 3.80% in March 2015 from 11.20% in June 2017. It reported a loss of Rs132.65 crore in the first quarter ended 30 June. IDBI Capital and Motilal Oswal are the bankers to the issue.
“The amount has touched Rs 400 crore. This was dominated by a broad section of investors including domestic mutual funds and insurance companies. Some bank treasuries have also bid for the stock because everyone thinks that this bank’s price is near the bottom and the upside will be substantial,” said a person familiar with the deal.
Dena will announce the final pricing of the issue on Friday. However this person said that the investors mostly bought the shares at the 5% discount to the Rs 30.73 per share floor price announced by the bank on Tuesday which works out to Rs 29.19 per share.
The bank’s shares ended at Rs 30.65 a share up 0.16% on Wednesday.
“Investors think that the potential for Dena shares to go to even Rs 50 per share or Rs 60 per share which will be a 100% gain are high. This was not the case with the other QIPs which had closed last month. That’s what attracted investors to this sale. Domestic investors dominated the sale and there was no single company which got more than 10%,” said the person quoted above.
Vijaya Bank raised Rs 700 crore in late August at around the Rs 66.36 per share floor price set by the bank. Before than SBI the largest bank in India had earlier raised Rs 15,000 crore in the biggest such sale in June.
The fresh capital will increase Dena’s capital adequacy ratio beyond 12% and the core Tier I ratio will improve to 7.65% from 7.28% at the end of June. “This capital along with the Rs 1000 crore the government will invest in the bank will last the bank for the next two years,” said this person quoted above.
The successful QIP means Dena has become the first bank under Reserve Bank of India (RBI’s) prompt corrective action to tap the equity market which means restricted dividend payments, branch openings, hirings and loans to companies rated below investment grade.
Dena’s net NPAs have deteriorated sharply from 3.80% in March 2015 from 11.20% in June 2017. It reported a loss of Rs132.65 crore in the first quarter ended 30 June. IDBI Capital and Motilal Oswal are the bankers to the issue.
