Read an update about Indusind Bank's FPO. They are planning to raise $300m Can anyone explain how an FPO affects the price of a stock?

Originally posted by pikrohit Read an update about Indusind Bank's FPO. They are planning to raise $300m Can anyone explain how an FPO affects the price of a stock?

They are raising money at four times the book which is not
bad.I would have been happy had they leveraged existing balance sheet little more (cap adq ratio was comfortable) and raised money at five times book.(success of HDFC lies
in the fact that they have always raised money more than five times book)

Originally posted by pikrohit Originally posted by koolvalue Originally posted by pikrohit Read an update about Indusind Bank's FPO. They are planning to raise $300m Can anyone explain how an FPO affects the price of a stock? They are raising money at four times the book which is not bad.I would have been happy had they leveraged existing balance sheet little more (cap adq ratio was comfortable) and raised money at five times book.(success of HDFC lies in the fact that they have always raised money more than five times book) I understand that they are issuing more shares but is that dilution? What effect will that have on the share price? Will it go down in the short term?

Dilution happens when money is raised close to book value.Here money is raised at nearly four times the book
hence the effect of equity dilution on future EPS will not be significant.What worries people is the rise in NPA
levels and if they continue to rise the stock may face
PE contraction.

http://www.moneycontrol.com/news/stocks-views/expect-20-returnshdfc-bank-indusind-ubs_955554.html