Federal Bank gains on QIP launch

The stock up 3% to Rs 120 in intra-day trade after the bank has launched a QIP issue of Rs 2,500 cr.

Federal Bank was up 2.6% to Rs 120 on BSE in intra-day trade after the bank has launched a qualified institutional placement (QIP) offering up to Rs 2,500 crore from institutional investors.

The bank has fixed floor price of Rs 117.04 per share for the QIP. Shares of Federal Bank closed at Rs 116.85 yesterday.

The bank plans to use the proceeds of the share sale to grow its loan book. The bank stated that it intends to use the net proceeds towards augmenting their Tier I capital to support growth plans and to enhance the business of our bank.

The stock hit a record high of Rs 122 on Friday, June 16, 2017, has outperformed the market during the current calendar year. Thus far in 2017, it rallied 79% as compared to 17.5% rise in the S&P BSE Sensex.

Analyst at Centrum Broking maintains an Outperformer rating on Federal Bank and value the stock at 2.0x FY19E ABV to arrive at target price of Rs 124.

“Looking at the historical and industry valuation, it would be difficult to give a valuation higher than this. However, given that Federal Bank is among the few small banks to have been reporting good numbers, the stock may witness rerating if the buying interest continues,” the brokerage firm said in Q4FY17 result update.

At 10:28 am; the stock was up 1.4% at Rs 118 on BSE, against 0.42% rise in the Sensex. A combined 4.6 million shares changed hands on the counter on BSE and NSE so far.