State-run banks defer fund-raising via QIP in uncertain market

Public sector banks, which delayed their qualified institutional placement (QIP) issues last year due to weak market conditions, are still not confident of the market response and say that they will wait for another few months to do so.

Banks say they want to gauge market conditions as well as investor appetite post-elections before raising funds through the QIP route.

The results of the ongoing 9-phase general elections in India will be declared on May 16.

Dena Bank, which plans to raise around Rs 570 crore through QIP, says that although the markets have improved, conditions are still not favourable.

"Markets are still not conducive for QIPs. We will be looking at raising the money only after June," Dena Bank executive director RK Takker told PTI.

Indian Overseas Bank, which got the board approval to raise Rs 350 crore last December, said it will require 3-4 months for selling its shares through QIP.

"The issue will definitely be in this year, but it will take three-four months as we have to see market sentiments first," its chairman and managing director M Narendra said.

Another state-run lender IDBI Bank said the bank plans to raise some money via QIP route, but not in the first quarter months.

"We will be looking at QIP definitely, but not in the first quarter. Also, pricing has to be good and there has to be enough interest from the market," said IDBI Bank chief financial officer P Sitaram.

The amount to be raised through the QIP will be decided depending on the amount the government plans to infuse into the bank in the current fiscal, he added.

Analysts believe that although the market condition this fiscal is better than last year, valuation of shares of banks are still below their book value and if they plan it now the issue will be much more diluted.

"Post-elections, a turnaround is likely. Probability of banks' coming out with QIP issues from June onwards seems more," said Angel Broking's banking analyst Vaibhav Agrawal.

Union Bank, which also deferred its QIP issue last year, had received approval from its board to raise Rs 1,400 crore. The bank has an option to raise money through the instrument till this December.