Government to reduce stake in these two banks through QIP

Key Highlights: 

• Andhra Bank, Dena Bank to raise capital from QIP
• Dena Bank's gross NPAs stood at 16.7% in FY17
• Andhra Bank's gross NPAs rose to 12.25% in FY17

The Government of India is looking to reduce its stake in two state-owned banks namely Andhra Bank and Dena Bank through share sale in a move to support their capital requirement.

Both Andhra Bank and Dena Bank are seeking merchant bankers for managing fund raising proposals through sale of shares.

Hyderabad-based Andhra Bank is seeking to select and appoint up to five merchant bankers for its Qualified Institutional Placement of shares.

For Andhra Bank's QIP, bids are expected to be submitted by July 06, 2017. While pre-bidding meeting is scheduled on June 30, 2017.

As per Andhra Bank's site, appointed bankers need to advise the lender on timing, modalities of the QIP and structure of the transaction.

At the same time, Dena bank will offer equity shares aggregating up to Rs 1,800 crore to QIP at such issue prices including premium with face value of Rs 10 each.

Dena Bank stated that this will be done in such manner that the Central Government shall at all times hold not less than 52% of the paid-up Equity share capital of the Bank.

Presently, government holds 68.55% stake in Dena Bank and 61.3% stake in Andhra Bank as on March 2017.

The indicative allocation of capital is expected to Rs 1,100 crore for Andhra Bank. 

Both the banks' gross NPAs have risen on year-on-year basis in the financial year 2016-17 (FY17).

Gross NPAs of gross advances stood at 16.7% (Rs 12618.73 crore) and 12.25% (Rs 17669.98 crore) for Dena Bank and Andhra Bank as on March 2017 compared to 9.98% (Rs 8560.49 crore) and 8.39%(Rs 11443.63 crore) as on March 2016.

On Tuesday, share price of Andhra Bank ended at Rs 53.55 per piece on BSE down 4.03%, while Dena Bank shares were slight up by 0.60% closing at Rs 33.50 per piece.