India’s IndusInd Bank raises $351 million from QIP

The deal triggers additional buying in the open market, pushing the stock to a new 12-month high in the wake of the transaction.

IndusInd Bank, a private sector bank in India, will raise Rs19.54 billion ($351 million) from a qualified institutional placement (QIP) after sources said the price would be fixed at the bottom of the range.

The deal was launched at about midnight Hong Kong time on Monday and completed before the opening of Indian trading yesterday morning, although as is usually the case with Indian QIPs the allocations took a long time (the deal must be placed with a maximum of 49 accounts) and as of late last night, the price still hadn’t been formally confirmed.

However, the deal attracted a lot of interest and sources said it was multiple times covered by high-quality investors. Supposedly the deal coincided with a relaxation of the foreign ownership limit in the stock, which helped spur the demand. But there was also good demand from domestic life insurance companies and asset managers.

As many investors realised that they would receive only a token allocation — if any at all — the buying spilled over into the secondary market, where the stock rose 2.5% to a new 12-month high during yesterday’s session. It closed 5.1% above the placement price and brought the year-to-date gains to 74%. The Indian markets will be closed for a public holiday today.

IndusInd Bank offered to sell 52.1 million new shares, which corresponded to 11.1% of the existing share capital and about 90 days of trading volume. The shares were marketed at a price between Rs375 and Rs384, which translated into a discount of 0.1% to 2.4% versus Monday’s close of Rs384.35 on the National Stock Exchange.

A source said the price would be fixed at Rs375 for a 2.4% discount.

The bottom of the range was set slightly above the regulatory floor price of Rs374.05, suggesting the bookrunners were confident in the level of demand. However, the deal was launched without any formal anchor orders. Still, because the public filing was made some time ago, investors were well aware of the deal and the bookrunners would know where to turn for early orders.

According to the term sheet, IndusInd Bank will use the proceeds to enhance its capital adequacy ratio and to increase its lending capacity. Some of the money may also go towards general corporate purposes.

This was the first time the company raised new equity since September 2011 when it pocketed Rs11.73 billion from another QIP.

The bookrunners this time around were CLSA, HSBC, JM Financial and Morgan Stanley.

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