The Emirates NBD Head Office on Baniyas street in Dubai. Image Credit: Gulf News

Dubai: Emirates NBD, the largest bank in Dubai, said on Thursday it is planning to raise up to Dh6.45 billion through a rights issue next month.

The bank, which is already listed on the Dubai bourse, will create an additional 758.8 million shares that will be issued at a price of Dh8.5 per share. This represents a discount of around 35 per cent from the shares’ closing price on October 16.

Proceeds from the rights issue will be used to strengthen Emirates NBD’s capital base and support its growth plans.

The bank’s share prices closed 3.8 per cent lower on Thursday following the announcement, dragging the Dubai Financial Market (DFM) index 1.62 per cent lower. The main index closed at 2,780.01.

Vrajesh Bhandari, senior portfolio manager at Al Mal Capital, said the rights issue has been expected, and at the price discount offered, it will encourage investors to participate. He pointed that Emirates NBD’s share prices are trading at an “unwarranted discount” to First Abu Dhabi Bank’s, and expected fundamentals to be back in focus after the rights issue.

Bhandari said the stock is a good buy for next year, especially as foreign funds flow in after the expected MSCI inclusion of Emirates NBD. The bank in September raised its foreign ownership limit to 20 per cent from 5 per cent, and announced plans to raise that further to 40 per cent. This is expected to allow the stock to be included in MSCI’s Emerging Markets benchmark, and bring in more foreign investment.

Current shareholders of the Emirates NBD stock will be allowed to purchase one right for every eight shares they own. Shareholders will then be allowed to trade their rights on the Dubai Financial Market from November 3 till November 14.