Mumbai: Shares of state-run banks Punjab & Sindh Bank and UCO Bank fell sharply on Tuesday, April 1. Punjab & Sindh Bank's stock dropped by up to 20 per cent, while UCO Bank’s shares declined by around 7 per cent. This sudden drop came after both banks announced the closure of their Qualified Institutional Placement (QIP) exercises last week.
What is QIP?
A QIP is a way for companies to raise funds by issuing shares to selected institutional investors, like insurance companies and mutual funds. In this case, Punjab & Sindh Bank raised Rs 129 crore through QIP. The majority of these shares were bought by Life Insurance Corporation of India (LIC), and SBI Life Insurance purchased 8.2 per cent of the total shares offered.
Other Banks Involved
Punjab & Sindh Bank also issued shares to Central Bank of India and Indian Overseas Bank as part of its QIP. Similarly, UCO Bank closed its QIP last week, with most shares bought by LIC and SBI-backed funds.
Impact on Stock Prices
Punjab & Sindh Bank’s shares are now trading at Rs 35.23, hitting a 52-week low. This is below the QIP issue price of Rs 38.37, indicating a loss for investors. The government holds a 98.25 per cent stake in Punjab & Sindh Bank as of the December quarter.
Regulatory Insights
On March 24, SEBI Chairperson Tuhin Kanta Pandey noted that PSU companies have shown improvement in meeting Minimum Public Share Holding (MPS) norms. However, he admitted that some PSUs might still find it challenging to achieve these targets.
