No plans to raise funds for next 2-3 years: ING Vysya Bank

Private sector lender ING Vysya Bank recently raised Rs 1,830 crore through the qualified institutional placement (QIP). Speaking to CNBC-TV18 about the happenings in the company, MD & CEO Shailendra Bhandari said, the QIP witnessed strong demand and the foreign investors’ portion was oversubscribed almost 4 times.

He further added that the bank is not looking to raise more funds for the next two-three years. “This amount will take into account uncertainties from basel-III implementation and possible implementation of dynamic provisioning. We are comfortable on capital. The bank’s capital adequacy ratio as on March 31 is 13.25 percent," he said. Below is the edited transcipt of his interview with CNBC-TV18: Q: Let us start-off with the qualified institutional placement (QIP) first. If you could just walk us through what kind of price you managed to raise money at and who the key contributors were? A: We raised about Rs 1,830 crore. We closed the QIP last week on June 27, 2013. We had kept a price band of Rs 606 to 612. The previous day close was Rs 606. We were able to do the placement at the top end of the range, Rs 612, which is sort of a one percent premium to the previous day’s close. Roughly half of this was taken up by ING Vysya Bank, the other half was taken up by both domestic and foreign investors. We had very good demand. So the foreign component was oversubscribed almost 4 times. So, we saw a very strong demand. Q: How much will this help in terms of augmenting your capital adequacy ratio? Where does it stand at currently and how much will it go by? A: Capital adequacy as of March was 13.25 percent and within that our tier-I was 10.5 percent. I cannot commit now because we haven’t released our balance sheet numbers as of June but what I can say is that we normally raise capital, which will last us two years or so. This time given the uncertainties, we have raised enough capital. This should keep us comfortable for 2.5-3 years. It will also take into account the uncertainties, which will come out of the basel-III implementation and the possible implementation of the dynamic provisioning. So we have got ourselves into position where we are comfortable on capital. We do not need to go into the market again for at least 2.5-3 years.  Q: What kind of dilution did this twin capital raising exercise entail though for the bank? A: In terms of dilution, this was about 16-17 percent dilution on the post issue capital. In terms of number of shares, we issued 3 crore shares. What I will point out is that last time when we had raised capital a few years ago, we had also issued 3 crore shares, which was on a smaller basis. So the dilution this time is much smaller than it was the previous time. _PAGEBREAK_ Q: Could you just walk us through the kind of names that subscribed to your issue, how much of it was long only, just to understand what kind of appetite there still is for private banking offerings? A: I am not sure that we normally talk about the specific investors. What I can say is that what we have seen over the years is that our stock tends to have people who like to be there for a long time. We have investors who have been with us for 7-8 years and whenever we would raise capital, they insist on participating. I do not think we have any hedge funds, we are not part of the exchange traded funds (ETF) flows. So we tend to see a very good quality of investors. Q: Talking about the business a little bit, last quarter the loan growth had slowed down to around 11 percent versus 20 percent previously perhaps because of a lower buyout of the priority sector lending related loans, can you give us an indication of what kind of sustainable loan growth trajectory ING Vysya Bank can see in the quarters to come? A: We have always said that we would look to grow faster than the market. Last year towards the end of the quarter, we did do some amount of balance sheet optimization and this was both to manage the priority sector for the previous year but also to minimize the impact for the next year. Hence, rather than just the advances, we did encourage people to look at total consumer assets. Year-on-year (Y-o-Y) March, we grew consumer assets by 17 percent. If you look at the average growth, it was 21 percent because we did manage our balance sheet towards the end of the year. Going forward, the Reserve Bank of India (RBI) has forecasted an increase in advances of 15 percent for next year. In all honesty, I do not think that is going to be easy. The reason is that the private sector investment cycle has showed no signs of taking off. A lot of the credit demand if it all it comes is not for good reasons because working capital cycles are being elongated. So while there is room to grow - you do need to be cautious. What we are very confident is whatever the market grows, we will grow higher than the market especially on the average basis as of March end, we may manage our balance sheet but we are quite comfortable that we grow better than the market but I suspect that the market will find it hard to grow at the RBI’s projected numbers. Q: In that sense what is your expectation from the monetary policy itself, after the way the rupee has depreciated almost all hope of any further rate cuts seem to be out of the window, but how have you assessed the newsflow that we have seen in the past couple of weeks and the impact it would have on the RBI’s move? A: Rather than just looking at a specific policy that tends to get effected by the most immediate news, I think our sense has been for sometime that in the course of this financial year, we will see interest rates, the headline rates, the repo rates, the reverse repo rates come down by about 75 bps. We still feel this will happen whether the first action happens in July or a little later, I do not think that is necessarily that important. I am still hopeful by the way that something will happen in July because though we are seeing movements in the rupee, it has stabilized a bit. What is very clear is that unless the private sector investment cycle picks up, you are not going to get sustainable growth and you may not get the private sector cycle going up unless you cut rates.