Canara Bank: Canara Bank to raise Rs 2,000 crore via QIP

Public sector lender Canara Bank is planning to raise up to Rs 2,000 crore through a qualified institutional placement (QIP) as early as December 2020. The Karnataka-based lender could become the first public sector bank to raise equity capital from the market this fiscal.

A senior bank official confirmed that the bank has started the process to raise money from the market. ICICI Securities, JM Financial, SBI Capital Markets and Axis Capital are bankers to the issue. Individual investment bankers could not be contacted immediately for comment.

“We have already started speaking to investors and have got a positive response. We want to raise capital when we can and not when required. We are comfortable in terms of capital right now but raising funds now will help us prepare for growth in the future,” said US Majumdar, general manager in charge of fundraising at the bank.

In April, Syndicate Bank was merged into Canara Bank as part of the government’s plan to consolidate public sector banks into a few large entities. The merger has cemented the bank’s position as the fourth-largest public sector bank by total business behind State Bank of India, Punjab National Bank and Bank of Baroda.

In the quarter ended June Canara Bank said its net profit increased 24% to Rs 406 crore from Rs 329 crore a year earlier, though the numbers are not strictly comparable since the merger in April.

The bank’s common equity capital (CET) was at 8.15% as of June 2020. Majumdar said the fresh fundraising will lead to a 38 basis point addition in the capital base taking CET to 8.53%. One basis point is 0.01 percentage point.

“We plan to start the roadshows in mid-Novemeber after we announce the second-quarter results and if all goes well we will raise the funds by December,” Majumdar said.

The bank’s net NPA ratio as of June was at 3.95% and provision coverage excluding the written-off accounts were at 79%. It remains to be seen if there is any spike in NPAs due to the impact of Covid 19 or because of unrecognised bad loans from the merged Syndicate Bank.

“They will pull through this fund raise. Even if they cannot get Rs 2000 crore, I think they can manage at least Rs 1500 crore. We are confident of getting the funds by December or latest by January,” said a banker involved in the issue.

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