PNB to raise Rs 7,000 crore through QIP by December this year

State-owned Punjab National Bank will raise Rs 7,000 crore through qualified institutional placement (QIP) of shares by December this year.

“We have got approval from the central government to raise Rs 7,000 crore through QIP. We are in the process of finalising the book running lead manager (BRLM). We are planning to go for QIP in the second or third week of December, depending on the road shows and BRLM,” PNB Managing Director & Chief Executive Officer S S Mallikarjuna Rao said in a virtual press conference on Tuesday.

When PNB had last raised funds through QIP, in December 2017, it had managed to accumulate Rs 5,000 crore. The sale had comprised about 14 per cent of the bank's outstanding equity at the time.

This financial year, the bank has already raised Rs 2,500 crore through Tier-II bonds and will further raise Rs 1,500 crore through this instrument and Rs 3,000 crore through additional Tier-I (AT-1) bonds by the end of November. This is part of the bank’s overall plan to raise capital to the tune of Rs 14,000 crore this financial year.

“As of today, we have no plans to go for stake sale in our subsidiaries. We are adequately capitalised and after our going to the market we expect the capital adequacy ratio to cross 14 per cent,” Rao said, adding that the bank would not require capital infusion from the central government for now.

The bank’s capital adequacy ratio, considered one of the key indicators for its health, inched up to 12.84 per cent in this quarter, compared with 12.63 per cent in the previous one. The RBI requires banks to maintain a capital adequacy ratio of 11.5 per cent. Banks are required to maintain a minimum capital to ensure they do not lend all the money they receive as deposits and keep a buffer to meet future risks.

In terms of non-core assets, the PNB management indicated that it would look to sell Rs 500 crore through the sale of real estate in 2020-21 but it was “waiting for an opportune time to sell it to get proper valuation.”

The bank has sharply revised its projection of accounts that might require a one-time loan restructuring under the RBI’s special window announced in August for dealing with Covid-19-related stress. It said advances worth Rs 20,000 crore might go for restructuring, compared with an earlier estimate of Rs 40,000 crore. “Surprisingly, not many people have requested for loan restructuring,” the PNB chief executive said. The expected restructuring for the bank would be less than three per cent of its loan books, compared with at least five per cent projected at the end of August.

The bank has received particularly low requests for restructuring from the corporate world. “We have received 15 applications amounting to Rs 2,022 crore. They fear that their rating (from agencies) will be under pressure for a period of two years – the period for which their loans will be restructured. That’s why the response has not been very high,” Rao added.

So far, PNB, the second-largest state-owned bank, has restructured loans worth Rs 41 crore for retail and micro, small and medium enterprises (MSMEs) and has received a request for another Rs 30 crore worth of loans for restructuring. The bank expects Rs 4,000-5,000 crore worth of retail and MSME loans to be restructured before December 2020, when the window for restructuring will close.