Union Bank Shares In Focus After Board Approves Rs. 8,000 Crore Capital Raise Via Rights Issue, QIP & Bonds

Shares of Union Bank of India are in focus now after the state-run lender just announced plans to raise up to Rs. 8,000 crore through a mix of equity issuance and Basel III compliant bonds.

The fundraising plan was approved by the bank's Board of Directors during its meeting held on May 26,, according to an exchange filing.

At the time of writing, Union Bank shares were trading at Rs. 167.22, down 0.98% for the day. Despite the mild decline in today's session, the banking stock has delivered strong returns in recent trading sessions, rising over 6.72% in the past five days. So far this year, Union Bank stock has gained nearly 8.76%, outperforming several PSU banking peers.

Union Bank Approves Rs. 3,000 Crore Equity Fund Raise

In its filing to stock exchanges, the bank stated that the board has approved a capital plan to raise funds not exceeding Rs. 8,000 crore in total. Out of this, Union Bank plans to raise up to Rs. 3,000 crore through equity capital in one or multiple tranches.

The bank said the fundraising could take place through multiple routes including a Further Public Offer (FPO), Rights Issue, Qualified Institutional Placement (QIP), preferential allotment, private placement, or a combination of these methods.

The proposed issue is now subject to approvals from the Government of India, regulatory authorities, and shareholders of the bank.

Basel III Bonds Worth Rs. 5,000 Crore Also Approved

Apart from equity capital raising, the board also approved raising up to Rs. 5,000 crore through Basel III compliant Additional Tier-1 (AT1) bonds and Tier-2 bonds. The fundraising may also include foreign currency denominated AT1 or Tier-2 bonds.

Banks usually issue Basel III bonds to increase their capital reserves, improve financial strength, and support future loan growth.

According to the official exchange filing, the bank stated, "Raising of Basel III compliant Additional Tier 1 Bonds and/or Tier 2 not exceeding Rs. 5,000 Crore, (including foreign currency denominated AT1/Tier 2 Bonds) within the overall limit of Rs. 8,000 Crore."