Shares of Canara Bank Ltd. rose to the highest since March after the state-run lender launched a qualified institutional placement.

The bank intends to raise Rs 2,000 crore from the issue, according to an exchange filing. The floor price of the QIP is set at Rs 103.5 apiece, a 12% discount to Monday’s closing price.

The bank’s board in July had approved Rs 5,000-crore fundraising for 2020-21 through various methods. Canara Bank secured an approval for the Rs 2,000-crore QIP in September.

The board will meet again on Dec. 10 to determine the issue price for the QIP as well as the quantum of shares to be allotted to qualified institutional buyers.

“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.

Shares of Canara Bank rose as much as 7.7% to Rs 126.45 apiece. The stock is up for the fourth straight day. Of the 17 analysts tracking Canara Bank, two have a ‘buy’ rating, nine suggest a ‘sell’ and six recommend a ‘hold’. The stock is trading 31.2% above the Bloomberg consensus 12-month price target of Rs 85.8 apiece.

Canara Bank stock, however, is the worst performer on the PSU Bank index on a year-to-date basis, with losses of more than 43%.

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