Federal Bank board to consider fundraising on July 21
The board of directors of Federal Bank will review and discuss matters related to fundraising and the allotment of shares to the International Finance Corporation (IFC) on July 21st.
As per a regulatory filing made on Wednesday, the Board of Directors of the lender, Federal Bank, is scheduled to convene a meeting on Friday, July 21, 2023. During this meeting, they will discuss and evaluate the issuance of equity shares through a preferential allotment to International Finance Corporation (IFC), IFC Financial Institutions Growth Fund, LP, and IFC Emerging Asia Fund, LP.
The proposed allotment is for up to 72,682,048 equity shares of the bank, with each share being priced at a maximum of ₹131.91.
The regulatory filing also mentions that upon completing the transaction, the investors will collectively hold up to 177,528,442 equity shares of the Bank.
Furthermore, during the board meeting, they will also evaluate options for borrowing or raising funds in Indian Currency or any other permitted foreign currency. This may include issuing debt instruments like Additional Tier I bonds (AT1 bonds), Tier II bonds, Long Term Bonds for infrastructure and affordable housing projects, Masala Bonds, and bonds issued for Environmental Social Governance funding (ESG bonds).
These fund-raising initiatives will be conducted through private placements in both domestic and overseas markets, while adhering to the overall borrowing limits set for the Bank.
Fedbank Financial Services Ltd (FedFina), which is the non-banking financial arm of Federal Bank, has decided to revive its plans for an initial public offering (IPO). The decision was announced in a BSE filing on Monday, July 17, 2023, after the board of directors of FedFina proposed the IPO during their meeting on the same day.
On July 13, Federal Bank reported robust financial results for the first quarter of the fiscal year 2023-2024. The bank recorded a net profit of ₹853.74 crore in Q1 FY24, showing a substantial growth of 42.2% compared to ₹600.66 crore in the same period last year.
Furthermore, the bank’s net interest income (NII) for the quarter rose by 19.6% to ₹1,918 crore, up from ₹1,604.5 crore in the corresponding period of the previous year. The net interest margin (NIM) contracted slightly by 7 basis points to 3.15% from 3.22% year-on-year.
These financial results reflect the bank’s positive performance and indicate its continued efforts to achieve growth and strengthen its financial position in the market. The decision to revive the plans for an IPO by FedFina further signifies the company’s intention to raise funds and explore new opportunities for expansion and development.
LKP Securities, an esteemed brokerage firm, maintains a favorable outlook on Federal Bank’s Net Interest Margins (NIMs), suggesting that they have likely reached their lowest point and are expected to expand in the future. This anticipated growth in NIMs is driven by the prospect of faster yield expansion, which will be facilitated by a favorable loan mix and overall growth in the bank’s business.
The positive stance on Federal Bank’s performance is evident in LKP Securities’ decision to reiterate its Buy rating on the bank’s stock. By reaffirming this recommendation, the brokerage expresses confidence in the bank’s potential for further growth and value appreciation. The target price of ₹160 per share set by LKP Securities underscores their belief in the bank’s ability to generate favorable returns for its investors.
Federal Bank’s strategic focus on optimizing its loan portfolio and achieving a balance between various lending activities contributes to the expected improvement in NIMs. As the bank pursues business expansion and capitalizes on market opportunities, the yield growth is likely to gain momentum, positively impacting its NIMs.
Overall, LKP Securities’ positive assessment of Federal Bank’s NIMs and its decision to reiterate a Buy rating reflect its confidence in the bank’s performance and its potential to deliver value to shareholders. As investors take note of the brokerage’s recommendation, it may further enhance the bank’s position in the market and attract investor interest.
While Federal Bank’s share price has experienced a decline of more than 3% year-to-date (YTD), it has shown strong performance in the last one year, with a growth of over 25%. Moreover, the stock has witnessed an impressive rally of over 157% over the past three years, reflecting positive sentiment and investor confidence in the bank’s prospects.
As of 11:00 am, Federal Bank’s shares were trading 0.41% lower at ₹134.25 apiece on the Bombay Stock Exchange (BSE). Despite the slight dip in share price during trading hours, the overall performance and outlook presented by LKP Securities remain optimistic.
