IDFC First Bank was formed after the merger of IDFC Bank and Capital First Ltd. It is a private sector Indian Banking Company with its headquarters situated in Mumbai. The bank started its operations in 2015 after getting the required banking license from Reserve Bank of India (RBI). With Mr. Rajiv Lall as its Chairman and Mr. V. Vaidyanathan as its MD and CEO, IDFC First Bank has more than 600 branches situated in 28 States/ Union territories of India. Since the merger, the bank started retail lending too, instead of financing infrastructure projects. Due to the pandemic, the stress in retail lending increased, but the bank was comparatively relaxed due to its low cost of Current Account and Savings Account (CASA) deposits. CASA rose from 31.87% to 51.95%. This was mainly due to forced savings habit of the customers during the pandemic period, and thus bank enjoyed the benefit of the same. What is QIP? IDFC First Bank informed the stock exchange that it had approved the issue of 52.31 Cr. equity shares, having a face value of Rs. 10 to QIBs in its board meeting. The issue price of the shares was set to Rs. 57.35 per equity share. The issue opened on 30th March, 2021 and closed on 6th April 9, 2021. This QIP will help the bank to raise capital and thus help the bank to improve its liquidity, funding and lending process. This QIP was necessary because the Reserves and Surplus of the bank fell from Rs. 13,337 Cr. to Rs. 10,532 Cr. from March 19 to March 20. Thus, the additional capital was required so that the bank could expend its business. As we know that it is in the business of retail lending as well, and the retail lending is growing day by day, the extra funding could really help the bank to go the extra mile. Bajaj Allianz Life Insurance Company, three funds by Baillie Gifford, BNP Paribas Arbitrage, City Of New York Group Trust, HDFC Life Insurance and Tata AIA Life Insurance were among the allottees who received more than 5% of the equity shares offered in the QIP issue. Around 68.33% of the equity shares issued was allotted to foreign investors and the remaining 31.67% was allotted to the domestic investors. The total amount of capital raised was about Rs. 3000 Cr from this QIP. The capital raised through QIP, helped IDFC bank to maintain the Liquidity Coverage Ratio (LCR) as per Basel 3 norms, as the concentration of top 20 depositors had declined by 1250 basis points(bps) to 7.76%, the issue helped the average LCR to rise by 4,350 bps, thus resulting in increase of year-on-year basis by 155%. The lending industry will be affected even more due to the second wave of the Covid-19 virus. The fear of moratoriums is hovering around the banks. Borrowers with soft financials may declare bankruptcy and banks has to take a big hit out of it. Since the bank has a retail exposure, there is a probability for the bank to again report higher NPA’s because of shut business and lockdown. Thank you.
Qualified Institutional Placement (QIP) is a fund-raising tool for the listed companies. QIP enables listed companies to raise funds from the Qualified Institutional Buyers (QIB). It was introduced to reduce complications for the Indian companies to raise funds from the overseas market.
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