Mumbai: Banks are preparing for collective equity fundraise of nearly ₹40,000 crore in the second half of this financial year, show data compiled by ET. They are expected to use the fresh capital to reinforce balance sheets, mainly to support expansion.
The boards of state-run Punjab National Bank (PNB) and Bank of Maharashtra have approved proposals to raise ₹7,500 crore each. Union Bank of India said it may opt for a qualified institutional placement (QIP) as well as other equity routes for raising ₹6,000 crore.
PNB, Union Bank of India, Bank of Maharashtra and Central Bank of India will seek shareholder approval for fundraising at their upcoming annual general meetings.
“PNB needs immediate funds because they have had a strong sequential growth of 5%, and if growth accelerates further, they will need capital,” said Nitin Aggarwal, banking analyst at Motilal Oswal. At “Central Bank of India and Bank of Maharashtra… government shareholding is above 75%. RBL Bank will raise funds because it is growing at 18-20% and burning capital on the unsecured book. AU (Small Finance Bank) also needs growth capital, and we expect a capital raise from them within a year.”
Improving Capital Adequacy Ratio
Analysts say banks are aiming to shore up balance sheets and meet credit growth requirements, as mandated by the Reserve Bank of India (RBI).
“We are seeing a lot of public and private sector lenders plan equity fundraisings because they need this capital every two to three years to scale up growth,” said Ashutosh Mishra, lead BFSI (banking, financial services and insurance) analyst at Ashika Stock Broking. “Even the RBI capital adequacy norms want banks to put more skin in the game. You also have to consider that if internal accruals sustain a growth of 8-10%, this equity fundraise will help banks grow upwards of 12%.”
Others that have taken enabling resolutions for raising capital include Central Bank of India and AU Small Finance Bank, both of which are planning to garner ₹5,000 crore each through QIPs.
AU Small Finance Bank is also planning to raise another ₹6,000 crore through debt financing.
Meanwhile, RBL Bank said it could raise ₹3,500 crore. This will be its first share issue via institutional placement since 2021, when it saw a sudden change in management. The lender has plans to raise another ₹3,000 crore through an issuance of debt securities via private placement.
“A lot of these are enabling resolutions,” said Mona Khetan, vice president, institutional equity research at Dolat Capital. “The market is very buoyant right now, and public sector banks especially are getting trading at good valuations. So, the thought may be to raise capital when they can get premium valuations.”
