India: ICICI, HDFC, Axis Bank Raise Nearly  $4.7b  Via QIP

On Monday, ICICI Bank launched its QIP to raise $2 billion ( ₹15,000 crore). “The deal received strong interest from both domestic and foreign investors. The $2 billion deal saw a demand of almost $5 billion,” a person advising the bank on the fundraise said on the condition of anonymity.

On Tuesday, Axis Bank said it has raised ₹10,000 crore via QIP. The issuance price of ₹420.1 per equity share was at a 5 per cent discount to the floor price of ₹442.19, which was determined on the basis of the pricing formula.

Several products of ICICI Prudential Mutual Fund, BNP Paribas, and Government Pension Fund Global have subscribed to the shares through the placement, the bank said in a stock exchange filing. Other investors include T Rowe Price, Lazard, Fidelity, Bajaj Life, and Max Life Insurance, said a person advising the bank on its share sale.

Another private sector lender, HDFC, also closed a ₹14,000 crore fundraise on Tuesday through a combination of equity shares, non-convertible debentures (NCDs), and warrants. In a filing, HDFC said its committee of directors has approved the issue of 5.68 crore equity shares at an issue price of ₹1,760 apiece, including a premium of ₹1,758 per share.

“The issue of equity shares pursuant to the issue is for an amount aggregating ₹10,000 crore,” HDFC said in a regulatory filing, adding that the lender issued warrants worth ₹307.3 crore and NCDs worth ₹3,693 crore.

These developments highlight that investors are taking a long-term view and are willing to bet on sector leaders despite near-term headwinds because of the COVID-19 pandemic.

“The recent spate of successful fundraising by established banking, financial services, and insurance players underlines the willingness of investors to take a long-term view of the sector. We expect the momentum to continue for issuers with strong businesses,” said Ravi Dubey, partner, IndusLaw.

For sectors most affected by the pandemic, such as aviation and hospitality, fundraising remains a challenge. However, sector leaders will be preferred by the investors, he said.

The fundraising rounds are likely to bolster the capital position of these lenders amid the COVID-19 crisis, which has forced lenders to set aside more provisions and cover against future bad loan shocks. “We believe the bank is well-placed to leverage all growth opportunities that will come in as the economy opens up and is in a strong position to combat challenges,” said Amitabh Chaudhry, managing director and chief executive officer, Axis Bank.

The Reserve Bank of India’s Financial Stability Report had warned of a spike in bad loans and decline in capital adequacy ratio of banks due to COVID-19.