Federal Bank raises Rs 2,500 crore via QIP

Federal Bank has raised Rs 2,500 crore by selling shares to institutional investors in a qualified institutional placement (QIP) that closed early this morning, two people familiar with the sale said.

The sale was done close to the top end of the price band the bank had set, these people said. “There was demand from both domestic as well as foreign investors which helped the bank also retain its green shoe option. The market still has the appetite for banking stocks, particularly foreign investors which see uncertainties in markets like the US,” said one of the persons cited above.

Federal Bank had launched the QIP on Wednesday seeking to raise Rs 2000 crore with an option to retain another Rs 500 crore. The price band of the sale was set at Rs 111.50 to Rs 116.70 per share, just below Wednesday’s closing of Rs 116.85 per share.

Kotak Mahindra Bank, IIFL, Citibank and Deutsche were the bankers to the issue.

“Demand was strong and we managed to get most of the bids at the top end of the price band. Now the regulatory process is on. The bank will meet on Tuesday to finalise the final issue price and decide the allocations to investors,” said the second person cited above.

Federal has become the sixth bank to raise money via a QIP in 2017, following issues from Yes Bank, DCB Bank, United Bank of India, Kotak Mahindra Bank and State Bank of India.

SBI’s Rs 15,000 crore sale to institutional investors earlier this month was the largest such sale in India. Kotak had raised Rs 5,803 crore in May.

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Federal Bank has been one of the best performing banks with a 75 per cent raise in its stock price in 2017. It’s net profit rose 25 times to Rs 257 crore in the quarter ended March 2017 from Rs 10 crore a year ago due to lower NPA provisions and strong interest income.

“The bank is doing well and unlike many others does not have to face write downs due to NPAs. The capital now raised will help the bank fuel its growth for the next couple of years,” said the first person quoted above.
Federal’s net NPAs dropped to 1.28 per cent in March 2017 from 1.34 per cent a year earlier. The bank added Rs 244 crore in fresh NPAs compared to the Rs 536 crore added in the corresponding quarter the previous year.