Union Bank board approves raising up to Rs 5,000 crore via QIP, sets floor price

Union Bank board approves raising up to Rs 5,000 crore via QIP, sets floor price

The board of Union Bank of India has recently given its approval for a plan to raise capital through a qualified institutional placement (QIP). The decision was made during a meeting of Union Bank’s committee of directors responsible for capital fund raising. The details of the approval are as follows:

1. Capital Raising: The bank intends to raise funds through a qualified institutional placement (QIP), which is a mechanism for companies to issue shares and raise capital from institutional investors.

2. Amount: The bank plans to raise up to Rs 5,000 crore through the QIP process. This indicates the maximum amount of funds that the bank aims to secure from this capital raising exercise.

3. Floor Price: The board has set a floor price of Rs 91.10 per share for the QIP. The floor price is the minimum price at which shares will be issued to institutional investors as part of the QIP process.

4. Committee Decision: The committee of directors responsible for capital fund raising within Union Bank met on August 21, 2023, and made the decision to open the QIP issue on the same day, i.e., August 21.

5.Exchange Filing: The bank made an official regulatory filing regarding this decision, which provides transparency to investors and the market about the bank’s capital raising plans and the relevant details.

Qualified institutional placement (QIP) is a common method for companies, including banks, to raise capital from institutional investors such as mutual funds, insurance companies, and foreign institutional investors. By issuing new shares, companies can secure the necessary funds to support their growth initiatives and strengthen their balance sheets.

In the case of Union Bank of India, the decision to raise capital through a QIP indicates the bank’s proactive approach to bolster its financial resources and support its business expansion plans. The floor price of Rs 91.10 per share sets a baseline for the pricing of the shares to be issued, providing a reference point for potential investors participating in the QIP.

The committee of directors at Union Bank of India has granted approval for raising funds through the issuance of equity shares via qualified institutional placement (QIP), with the total amount not exceeding Rs 5,000 crore. The bank emphasized that this capital raising initiative is contingent upon obtaining the necessary regulatory and statutory approvals.

Additionally, Union Bank disclosed in another exchange filing that the committee is scheduled to convene once again on August 24. During this meeting, the committee will deliberate on and finalize the issue price for the equity shares that will be allotted to qualified institutional buyers as part of the QIP offering. This includes considerations related to any potential discounts that may be applied to the issue price.

The QIP method allows Union Bank to secure capital from institutional investors, enabling the bank to further strengthen its financial position and facilitate its growth plans. The forthcoming meeting on August 24 will play a critical role in determining the final terms of the equity share offering, including the issue price and any associated discounts.

The decision to raise funds through qualified institutional placement (QIP) by Union Bank of India comes shortly after the bank announced its financial results for the first quarter of the current financial year. The bank’s financial performance showed substantial growth and improvements in various aspects:

1. Net Profit Surge: Union Bank reported an impressive 107 percent year-on-year rise in its standalone net profit for the first quarter of the current financial year. The net profit reached Rs 3,236.44 crore, reflecting a significant improvement in the bank’s earnings.

2. Net Interest Income Growth: The bank’s net interest income, a key measure of its core business performance, increased by 16.59 percent year-on-year to Rs 8,840 crore. This growth suggests that the bank’s lending activities and interest earning assets are performing well.

3. Asset Quality Improvement: Union Bank also demonstrated an improvement in its asset quality. The gross non-performing asset (NPA) ratio, which indicates the proportion of bad loans in the bank’s portfolio, improved by 288 basis points (bps) compared to the year-ago period. Additionally, the net NPA ratio decreased by 173 bps over the same period. These improvements signify a healthier loan portfolio and reduced credit risk.

4. Stock Performance: On August 21, Union Bank’s stock closed at Rs 91.80 on the Bombay Stock Exchange (BSE). This closing price represented a 2.81 percent decline compared to the previous day’s closing price. It’s worth noting that stock prices can be influenced by various market factors and sentiment, and fluctuations are common.

Given the positive financial results and improvements in asset quality, the decision to raise capital through QIP indicates the bank’s proactive approach to further strengthen its financial position and support its growth plans. By raising additional funds, the bank can enhance its lending capabilities, invest in technology, and pursue expansion opportunities, among other strategic initiatives.