Federal Bank on July 19 announced that it has launched a qualified institutional placement (QIP) issue, and fixed the floor price at Rs 132.59 per share.
The private lender, in a regulatory filing, said the credit, investment and raising capital committee of its board of directors has "authorised the opening of the issue today, i.e., July 19, 2023".
The committee arrived at a pricing formula of "Rs 132.59 per equity share", the exchange filing noted, adding that "the bank may, at its discretion, offer a discount of not more than five percent on the floor price so calculated for the issue".
The floor price, at Rs 132.59 apiece, marks a discount of around two percent as against the current market price. The scrip settled at Rs 135.70 on the BSE in the trading session on July 19, which was 0.67 percent higher as compared to the last closing price.
In May, sources told Moneycontrol that Federal Bank was planning to raise around Rs 4,000 crore through a combination of QIP and preferential allotments. The lender has picked investment banks Kotak Mahindra Capital, Axis Capital, BofA Securities and JP Morgan as advisors, the persons privy to the development had said.
The capital raise is aimed at bolstering retail growth and inorganic activity, they added. "The deal is on and a clutch of 4 advisors, two domestic investment banks and two foreign investment banks, have been shortlisted," one of the persons above had said.
The Kochi-headquartered Federal Bank is backed by the World Bank's investment arm IFC (International Finance Corporation). In July 2021, Federal Bank saw a Rs 916 crore equity infusion by IFC which picked up a 4.99 percent stake.
As of now, it was not clear if IFC would participate in case the preferential allotment route was adopted by the lender.
In an interview to Bloomberg dated May 22, 2023, CEO Shyam Srinivasan said the bank planned to raise as much as $486 million in the next few months to support its expansion.
The fundraising could be via debt or equity, or a combination of the two, with the final structure still under consideration, Srinivasan told the news agency.
The capital will fund growth as Federal Bank pushes further into retail banking with plans to open about 100 branches this year, and seeks to buy a microfinance company, he added.
The brokerage arm of JP Morgan recently initiated coverage on the Federal Bank stock with an "overweight" call.
"The primary attraction of the stock is its relatively stronger liability franchise vs. mid-cap bank peer group in an environment of tight LDRs (loan-to-deposit ratios). This is offset against a lower ROA (return on asset) the bank earns given a conservative book. This is incrementally changing with faster growth planned in high ROA segments. However, these are also relatively new and credit untested segments," it said.
In the quarter ending June 2023, Federal Bank reported a net profit at Rs 854 crore, which was 42 percent higher as against Rs 600.7 crore clocked in the year-ago period. The lender's net interest income surged by 20 percent to Rs 1,918 crore from Rs 1,605 crore in Q1FY23.
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