Federal Bank, a private sector bank is presently led by CEO & MD Shyam Srinivasan. Mr. Shyam has chosen investment banks like Axis Capital, BofA Securities, Kotak Mahindra Capital, and JP Morgan as expert advisors. The idea is to implement a big round of fund-raising campaign in which the private lender aims to seek up to Rs. 4,000 crores, says a report on Moneycontrol.
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The fund-raising proposal is intended to improve retail growth and execute an inorganic activity through a combined portfolio of the QIP-qualified institutional placement and favored allotment routes, said the report. Two domestic investment banks and two foreign investment banks have been shortlisted by the company for the Federal Bank management reportedly.
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Although the exact quantum and contours haven’t been assured as of now, the plan is being discussed to raise funds of Rs. 3,000 crores via the QIP route and the balance through the preference route. The sources have shared the information on an anonymous basis to the media portal.
The Federal Bank, which has its headquarters in Kochi in Kerala is supported by the World Bank’s investment division IFC – International Finance Corporation. In 2021, the bank witnessed an Rs. 916 crore equity infusion by IFC which selected up a 4.99 % share.
In May 2023, when CEO Shyam Srinivasan was speaking with the media, he said that Federal Bank is planning to increase as much as $486 million in the coming months to initiate its expansion plans. Debt or equity or a mixture of two with the final layout for the fund-raising is still being considered by the bank.
These initiatives will support Federal Bank’s growth and increase its presence in retail banking with plans to set up around 100 branches in 2023. The bank also plans to purchase a microfinance company and its share price has risen by approximately 32% in the past year.
For the unaware, the QIP is a market-linked instrument that assists the bank to raise money from qualified institutional buyers (QIBs), for example, mutual funds, insurance companies, and pension funds. The preferential allotment is a private placement of stocks to institutional investors at a pre-fixed cost.
Federal Bank is raising funds to support its growth ideas. It also plans to use the funds to increase its branch network, technology investment, growth in retail and wholesale businesses, and others. The bank also has ideas to utilize the funds to make new acquisitions, like the purchase of a microfinance company.
The fund-raise is a positive outcome for Federal Bank. The bank plans to use these funds to make its balance sheet strong and also well-position itself in the coming years. It also has ideas to give a strong financial performance and a robust business model in the coming future. The fundraising will allow the bank to enhance its credit profile, which will make it more appealing to borrowers and investors. Although no official announcement has been made about the terms of the fund-raise, such as the price at which the shares will be issued, the bank may issue the stocks at discounted rates from the present market price.
