The bank has decided to raise Rs 2,000 crore from issue of QIP (Qualified Institutional Placement).
QIP is a capital-raising tool, primarily used in India and other parts of southern Asia, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a qualified institutional buyer (QIB).
Rs 103.50 per piece is the floor price of the QIP, and the move is a part of the company’s decision to raise Rs 5,000 crore in 2020-21 through various methods.
The issue price of the QIP will be determined in a company board meeting on December 10. Another point being handled is the quantum of shares to be allotted to QIBs.
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“The capital-raise will increase CET-1 ratio by 0.4% to 8.8% and imply 13% dilution,” Morgan Stanley analyst Sumeet Kariwala said in a note. But even after this fundraising, Canara Bank’s balance sheet, according to Morgan Stanley, will remain one of the weakest in its coverage universe. The research firm expects further capital-raising, which will drive further dilution. “Valuation is cheap, but we see much better risk-reward at other coverage banks,” Kariwala wrote.
However, the stock of the company is the worst performer in the index of PSU banks.