PNB to raise Rs 7,000 crore through QIP by December this year

Bank receives fewer proposals for restructuring than expected as companies fear impact on ratings

Punjab National Bank will raise Rs 7,000 crore through a share sale to institutional investors by December, even as the state-owned lender hasn’t received as many requests for Covid-19-related loan restructuring as expected.
 

“We have got approval from the government to raise Rs 7,000 crore through QIP (qualified institutional placement). We are in the process of finalising the BRLM (book running lead manager). We are planning to raise money in the second or third week of December, depending upon the road shows and the BRLM,” PNB Managing Director and Chief Executive Officer S S Mallikarjuna Rao said at a virtual press conference.
 

The last time PNB raised money through QIP, in December 2017, it had managed to accumulate Rs 5,000 crore. The sale had comprised about 14 per cent of the bank’s outstanding equity.
 

As a part of the plan to raise Rs 14,000 crore this fiscal year, the bank has already raised Rs 2,500 crore through tier-2 bonds. It will raise additional capital through tier-2 bonds of Rs 1,500 crore and Rs 3,000 crore through additional tier-1 (AT-1) bonds by the end of this month.
 

The bank has no plans to sell stake in its subsidiaries and will not approach the central government for capital infusion, as it expects the capital adequacy ratio to touch 13.5-14 per cent following the fund raising, up from 12.84 per cent at the end of September 2020.
 

The RBI requires banks to maintain the capital adequacy ratio at 11.5 per cent. Banks are required to maintain a minimum level of capital to ensure they do not lend all the money they receive as deposits and keep a buffer to meet future risks.

 

In terms of non-core assets, the PNB management indicated that it will look to raise Rs 500 crore through sale of real estate in 2020-21 but it is “waiting for an opportune time to sell it to get proper valuation”.
 

The bank has sharply revised its projections of accounts that may require one-time loan restructuring, under the RBI’s special window announced in August for dealing with Covid-19-related stress. It estimates that borrowers worth Rs 20,000 crore, which accounts for around 3 per cent of its loan books, will require restructuring, from its earlier estimate of Rs 40,000 crore (5 per cent of the book). “Surprisingly, not many people have asked for restructuring… We have received 15 applications from companies amounting to Rs 2,022 crore. They fear that their rating (from agencies) will be under pressure for a period of two years — the period for which their loans will be restructured. That’s why the response has not been very high,” the PNB chief executive said.
 

So far, the second-largest state-owned bank has restructured loans worth around Rs 41 crore for retail and micro, small and medium enterprises (MSMEs) and has received request for another Rs 30 crore worth of loans for restructuring. The bank expects Rs 4,000-5,000 crore worth of retail and MSME loans to be restructured before December 2020 — when the window for restructuring will be shut.