Disha Tandon, Pune
Punjab National Bank, one of India’s largest public sector banks, now intends to issue a considerable amount of equity so it can mop up ₹7,500 crores for the next fiscal year. Because this will be achieved through Qualified Institutional Placement (QIP) exclusively by institutional investors, the total sum raised is likely to add more capital surplus to the book of the bank. The bank’s board had approved a decision in December 2023 to increase its capital surplus by mopping up to ₹75 billion or roughly $898 million together.
PNB’s QIP is a part of its strategic plans for strengthening its capital base, as it strives to move in tandem with the increasing and improving loan demand. Even among other large Indian banks, PNB is now encountering an upward trend in loan demand and requires additional capital reserves for stronger growth prospects. The QIP will be completed within the next six months, as confirmed by CEO and MD Atul Kumar Goel.
This fundraising effort comes at a time when fundraising is picking up pace in the Indian banking sector. Already, some of the big public sector banks like the State Bank of India have approached the equity market for support or are in the process of topping up their capital reserve.
PNB’s share price has appreciated by nearly 39% over the last year, taking it to ₹1.23 lakh crore in market capitalisation. The only stumbling block has been in the asset quality, though the bank has witnessed a spectacular six-fold jump in its net profit for January- March 2024.
Improvement in its asset quality has also come as an impressive stride for the bank. PNB expects loan recoveries to touch around ₹180 billion in FY 2024-25, keeping a focus on the recovery of bad loans. Gross and net non-performing asset ratios under Goel would go below 5% and 0.5%, respectively, by March 2025, furthering investor confidence.
Short-term things that PNB is foreseeing include strong growth at 11%-12% on loan disbursements and 9%-10% on deposit rise for fiscal year 2024-25. The bank expanded its network with 150 new branch additions in the current fiscal year- a clear indicator of its intention towards growth as well as connectivity.
With PNB setting itself to roll out its QIP, the bank is now ready to attract very strong demand from institutional investors due to the improvement in financial performance and its well-defined growth trajectory. The capital it raises will continue to help PNB grow its loan book, enhance its asset quality and further reinforce its position in the Indian banking landscape.