Bank of Baroda may float $1-bn QIP; share up over 2%

Bank of Baroda (BoB) is likely to float a $1-billion qualified institutional placement (QIP) in two-three weeks. 
 
According to a report in November, the Finance Committee of the Board approved the proposal of raising additional equity capital of up to Rs 6,000 crore by way of rights issue or QIP. 
 
This move is positive for the bank, as it would provide much needed headroom to provide for bad loans and would also help for next leg of loan growth, according to an India Infoline report. 
 
The bank's stock may react positively on this news.
 
Banks have been raising funds in the past few months to boost their capital adequacy ratio ahead of the government's recapitalisation plan.
 
Bank of Baroda’s (BOB) earnings is likely to remain subdued in the near term due to an elevated provisioning requirement. 
 
According to India Infoline, earnings growth should recover over the medium term, driven by gradual moderation in NPL accrual and reduced provisioning. We forecast BoB to deliver 60% EPS CAGR over FY17-20E. The stock is trading at  1x on FY20E P/BV. We have positive outlook on the stock.
 
BoB is currently trading at 177.80, up 2.69% from its previous closing of Rs 173.15 on the BSE.
 
The scrip opened at Rs 173.85 and has touched a high and low of Rs 174.9 and Rs 170.4, respectively.