SBI FPO IPO Rights Issue
SBI to raise Rs 100 bn
SBI FPO IPO Rights Issue
State Bank of India (SBI) intends to raise Rs 100 billion, reports Times of India.
India`s largest commercial bank the State Bank of India (Q, N,C,F)* (SBI) which had fallen short of its loan disbursement target of 24-25% in the first half (instead recording a rise of around 10%) is in talks with the government to raise capital.
On its part, the government has decided in-principle on a rights issue during the current fiscal, which will cost the centre around Rs 100 billion, but wants the bank to wait for a while before issuing fresh shares.
In the absence of amendments to the SBI Act, government`s stake can drop to 55% from 59.7% at present. The government wants SBI to wait till the Bill is approved so that it can reduce its stake to 51% and help the bank generate more capital. The Bill can only be passed in December.
According to banks calculations, it needs upto Rs 1,800 billion over the next five years, though the centre recently told the Parliament that the bank needed a little over Rs 860 billion. The finance ministry told a standing committee that SBI needs over Rs 1,400 billion capital over the next six years to meet its expansion needs.
Shares of the bank closed down Rs 37.10, or 1.95%, at Rs 1,863.25. The total volume of shares traded at the BSE was 614,342. (Friday).
The State Bank of India is planning to raise capital through public offer of shares in the market and is awaiting the nod of the Finance Ministry to meet additional capital requirements for business growth and statutory requirement.
“We are under discussion with the Finance Ministry and awaiting clearance from them. Once we get clearance, capital would be raised within 90 days,” SBI chairman O P Bhatt told reporters on Friday.
The bank is expected to raise around Rs 10,000 crore either through follow on public offer (FPO) or rights issue. Government’s stake would be diluted if the bank brings out a public offer but will remain unchanged in case of rights issue.
Bhatt was in the capital to participate in the meeting called by Finance Minister P Chidambaram to discuss credit needs of the auto, auto-component and paper industries.
Admitting that credit growth of the bank was marginally lower than the target of 23-24 per cent till September end, he said,” Once the sanctioned loans are disbursed, it is expected to go up. We are hopeful to achieve up to 25 per cent credit growth this fiscal.”
He, however, added that the capital would be raised from the market even if the credit growth remained lower than the target rate.
On the interest rate outlook, he said, “Interest rates are likely to remain stable at least till the mid-term review of monetary policy by the RBI” scheduled to be announced on October 30.
