IDBI Bank plans to raise Rs 4,000 cr in equity via QIP

Fundraising will help to absorb increased soured debt

Public sector lender IDBI Bank plans to raise equity capital upto Rs 4,000 crore to shore up capital adequacy ratio and ability to withstand pressures from rise in non-performing loans.

The board of the Mumbai-based bank approved raising the money through a share sale to institutional investors or a follow-on public offer, Bank said in a notice to Bombay Stock Exchange.

Its stock closed flat at Rs 112.4 per share over previous close.

The fundraising will help the lender, which had outstanding loans of 2 trillion rupees as of March 3, to absorb increased soured debt. Gross bad loans at IDBI Bank rose to 4.9% of total lending as of March from 3.2% a year earlier, exchange filings showed.

Senior IDBI Bank official said bank will seek shareholders nod at Annual General Meeting to be held later this year. The decision on timing for Qualified Institutional Placement (QIP) or public issue will be finalized after getting nod from the government which is majority owner.

The company had a capital adequacy ratio of 11.68% as of March 31, lower than the 12% required by the government. GS Sandhu, the Indian finance ministry’s banking secretary, said earlier this month that the government will allow its stake in several banks fall as low as 51% to let them raise equity capital.

The government owns 76.5% of IDBI, data compiled by Bloomberg show. The bank was started in 1964 by an act of parliament as a subsidiary of the Reserve Bank of India. The government took ownership in 1976 and the lender was listed in 1995.

Union Bank of India, another Mumbai-based public sector lender, is also seeking shareholders nod for QIP at AGM later this month. It is expected to visit market in second quarter of current financial year with offer.