Federal Bank shares flat ahead of board meet to raise funds

Federal Bank's net NPA stood at 0.69 percent, improving from 0.94 percent in the corresponding quarter last year.

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Federal Bank shares fell marginally to Rs 134.45 at 9.27 am on July 19 as company board is going to consider fundraising and shares allotment to IFC on July 21.

A meeting of the Board of Directors of Federal Bank will be held on July 21, 2023, to consider, issuance of equity shares by way of a preferential allotment, to International Finance Corporation, IFC Financial Institutions Growth Fund, LP, and IFC Emerging Asia Fund, LP for subscribing up to 72,682,048 equity shares of the bank as a price not exceeding Rs 131.91 per equity share.

The board also consider Borrowing/ raising of funds in Indian Currency or any other permitted foreign currency by way of issue debt instruments including but not limited to Additional Tier I bonds (AT1 bonds), Tier II bonds, Long Term Bonds (Infrastructure & Affordable Housing), Masala Bonds, bonds issued for Environmental Social Governance funding (ESG bonds), in domestic market and/or overseas market, on a private placement basis within the overall borrowing limits of the bank.

Also Read - Federal Bank subsidiary FedFina revives IPO plans

On July 13, the bank reported a net profit of Rs 854 crore for the April-June 2023 quarter, a jump from Rs 600 crore in the corresponding period last year.

The bank's gross non-performing asset (GNPA) also improved to 2.38 percent from 2.69 percent last year.

The lender's net NPA stood at 0.69 percent, improving from 0.94 percent in the corresponding quarter last year.

The bank's treasury revenue jumped to Rs 773 crores from Rs 548 crores in the corresponding quarter last year.

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LKP Research believes that the asset quality is likely to stay stable with significant improvement in profitability.

The research house has incorporated steady provision requirements along with stable growth in the balance sheet and thus expect it to deliver RoA/ RoE of 1.2%/15% by FY24E.

It reiterated buy with target price of Rs 160 (based on 1.2x FY25E Adj. BVPS); a potential upside of 23%.