Bank of Baroda QIP: Marshall Wace, Morgan Stanley, ICICI Pru, others invest in BoB’s Rs 4,500-cr QIP
Among the other backers of the QIP are Hong Kong-based asset manager Sigantii, Prudential Plc’s Eastspring Investments, San Francisco-based hedge fund Think Investments and Nippon Mutual Fund. Besides hedge funds and asset managers, French banks BNP Paribas and Societe Generale also bought shares on their proprietary trading books.
Bank of Baroda (BoB) has finalised allotment to investors after the QIP closed Tuesday. The infusion of funds will buttress the state-run bank’s capital position.
“Demand was better than what we have seen with other public sector banks that have done QIPs earlier this fiscal,” said one of the industry executives cited above. “The book size was about twice the amount the bank initially wanted to raise.”
SBI Capital Markets, BNP Paribas, ICICI Securities, HSBC and BoB Capital Markets were among the bankers to the issue.
In a stock exchange filing Tuesday, BoB said it had set an issue price of Rs 81.70 per share – at a 5% discount to the floor price of Rs 85.98 per share set according to regulations.
The bank’s shares closed at Rs 85.60 apiece, up 2.88% on the BSE, in line with the 2.28% rise in the benchmark Sensex.
“BoB, along with State Bank, is among the better placed PSU banks and it showed in the investor appetite. Unlike the previous issues, we easily collected the target amount,” said a second person aware of the deal.
The executive was pointing to similar QIPs by Punjab National Bank (PNB) and LIC-backed IDBI Bank. They fell short of their targets in December. While PNB managed about Rs 3,800 crore out of its targeted Rs 7,000 crore, IDBI Bank managed about Rs 1,400 crore out of the proposed Rs 2,000-crore issue.
BoB’s Rs 4,500-crore issue is thus the largest QIP by a PSU bank this fiscal. It will help improve the bank’s capital adequacy ratio to about 14% from 12.93%.
To be sure, domestic institutional investors in the QIP also included LIC.
BoB had swung to a net profit of Rs 1,061 crore in the quarter ended December 2020 from a loss of Rs 1,407 crore a year earlier on the back of growth in retail loans and improving margins, even as provisions fell at the corporate-focused lender.
The bank’s gross non-performing assets (NPA), including loans not classified as bad, were at 9.63%, down from 10.43% a year ago.
However, in its QIP placement document the bank said its special mention accounts (SMA) had jumped to 21% of loans by December quarter from just 8% in March 2020. SMA accounts are loans past due date but within the 90-day NPA cut-off.
BoB has made total excess provisions of Rs 1,891 crore, including Rs 370 crore on likely reversal of interest due to accounts being classified as NPAs later. If more provisions are needed, the enhanced capital will come in handy.
About half of BoB’s Rs 7.45 lakh crore total advances are corporate loans. However, the bank is diversifying into retail loans, particularly mortgages.
