Rakesh Jhunjhunwala picks up 1.6% Stake in Canara Bank
Last week, we had reported about the Rs.2,500 crore qualified institutional placement (QIP) of equity shares by Canara Bank. This week it emerges that nearly Rs.431 crore in the QIP was invested by Rakesh Jhunjhunwala. In short, Jhunjhunwala has absorbed more than 17% of the total QIP issue of Canara Bank. Post the allotment, Rakesh Jhunjhunwala now holds a 1.59% stake in Canara Bank.
Canara did QIP of 16.74 crore shares to qualified institutional buyers at a price of Rs.149.35 per share taking the total size of the QIP to Rs.2,500 crore. Out of this total QIP placement, Canara Bank has allotted 2.885 crore shares to Rakesh Jhunjhunwala at the price of Rs.149.35 pegging his investment in the QIP at Rs.431 crore. However, there were other major QIPs that also participated in the QIP.
While Rakesh Jhunjhunwala took 17% of the QIP issue, there were several institutions that took more than 5% of the QIP issue. The major investors in the QIP of Canara Bank included LIC (15.91%), BNP Paribas Arbitrage (12.55%), Societe Generale (7.97%), Indian Bank (6.37%), ICICI Prudential Life (6.37%), Morgan Stanley Asia (6.16%) and Volrado Venture Partners (6.05%).
However, on 25th August, after the disclosure, the stock of Canara Bank closed 3% lower at Rs.151.05 on the BSE. There could be two reasons for the tepid stock price performance. Firstly, the QIP placement has increased the paid up capital from Rs.1,647 crore to Rs.1,814 crore. To that extent, it will be EPS dilutive.
The other reason is that the market wants to see more traction in earnings growth and NIM expansion. The profit growth in the Jun-21 quarter was largely on the back of lower provisioning. Till there is greater clarity on performance, it looks like the markets will bide its time before getting enthusiastic about the stock.
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