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Punjab National Bank plans to raise Rs.7,500 Crore in 2024-25


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The board of directors of Punjab National Bank (PNB) have recently made a significant decision regarding the bank’s finances. In a meeting on Monday, the board approved a plan to raise ₹7,500 crore through Qualified Institutions Placement (QIP) or Follow-on Public Offer (FPO) during the fiscal year 2024-25. Detailed explanation about QIP and FPO is given below.

Equity Capital Raise Approval

The board gave the green light to raising equity capital in one or more tranches, with the possibility of using QIP, FPO, or any other approved method or combination thereof.

Government Shareholding Requirement

PNB is permitted to raise funds through share sales, with the condition that the Government of India’s shareholding does not drop below 52%.

Shareholder Voting Meeting

An Extraordinary General Meeting of the Shareholders is scheduled for March 5, 2024, through video conferencing, where shareholders will vote on this capital-raising decision.

PNB’s Official Statement

In a stock exchange filing on January 29, PNB officially stated, “The Board has approved the raising of equity capital for an amount aggregating up to ₹7,500 crore during FY 2024-25 through QIP/FPO or any other permitted mode, ensuring the shareholding of Govt. of India does not fall below 52%, subject to requisite approvals.”

Earlier Announcement and Stock Performance

PNB had previously disclosed its capital generation plan in December. In a filing dated December 29, the bank shared its approval to raise equity capital through QIP or FPO. On Monday, PNB shares closed 2.78% higher at ₹107.52 per share on BSE.

What is QIP and FPO?

Qualified Institutions Placement (QIP) and Follow-on Public Offer (FPO) are two different methods through which companies can raise capital by issuing securities. These are commonly used by publicly traded companies to meet their funding requirements. Here’s a brief explanation of each:

Qualified Institutions Placement (QIP):

  • Definition: QIP is a fundraising method where a listed company issues securities (usually equity shares) to institutional investors without making a public offering.
  • Eligible Investors: The securities are offered only to Qualified Institutional Buyers (QIBs) such as mutual funds, insurance companies, banks, financial institutions, etc.
  • Regulatory Compliance: QIP is regulated by the Securities and Exchange Board of India (SEBI) in the Indian context. Other countries may have similar regulatory bodies overseeing such offerings.
  • Purpose: Companies opt for QIP when they need to raise funds for expansion, debt repayment, working capital, or other corporate purposes.

Follow-on Public Offer (FPO):

  • Definition: FPO is a method of raising capital by a public company through the issuance of additional shares to the public after the initial public offering (IPO).
  • Eligible Investors: FPO involves offering shares to the general public, including retail investors, in addition to institutional investors.
  • Regulatory Compliance: FPOs are subject to regulatory approval and must comply with the securities regulations of the respective country.
  • Purpose: FPOs are often used when a company needs additional funds for expansion, acquisitions, debt reduction, or other significant corporate initiatives.

In summary, QIP involves the issuance of securities to qualified institutional investors without making a public offering, while FPO involves the sale of additional shares to the public, including both institutional and retail investors. Both methods allow companies to raise capital to meet their financial requirements, and the choice between QIP and FPO depends on the company’s specific needs and market conditions.

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