The Hindu : Business : SBI plans follow-on public offering in December

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Friday, Jun 29, 2007
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SBI plans follow-on public offering in December

Special Correspondent

To set up holding co. for its seven subsidiaries

— Photo: Paul Noronha

HOLDING TOGETHER: O. P. Bhatt (right), Chairman, with T. S. Bhattacharya, Managing Director, State Bank of India, addressing a press conference in Mumbai on Thursday.

MUMBAI: State Bank of India (SBI) on Thursday announced that it planned to set up a holding company for its seven subsidiaries. The Union Cabinet in April approved changes in the banking law to allow greater freedom to SBI’s subsidiaries — State Bank of Travancore, State Bank of Patiala, State Bank of Indore, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Saurashtra and State Bank of Hyderabad, O. P. Bhatt, Chairman, SBI, said while addressing a press conference here.

A reduction in controlling stakes held by the Reserve Bank of India (RBI) and the Government would allow the bank to raise more capital, Mr. Bhatt said, adding that the government control was hampering the bank’s ability to raise funds needed to compete in the economy, which was growing at over 9 per cent. According to him, the bank’s erosion of market share is a ‘concern’ and “We did some deep introspection on various matters including the market share.”

The bank also plans a follow-on public offering (FPO) by December, after Parliament passes an amendment to the Banking Regulation Act in the monsoon session. It would enable the bank to raise Rs. 8,000 crore ($1.96 billion) of capital after the RBI divests its 59.73 per cent stake to the Government.

The Government can bring down its stake to 55 per cent after the amendment.

Consequent to which SBI assets were expected to grow by 25 per cent in the next three years.

“We have set a target to raise market capital by a percentage point every year,” Mr. Bhatt said.

The bank migh require up to Rs. 50,000 crore ($12 billion) in the next few years to expand its businesses and invest in ventures including insurance, private equity and wealth management, he added.

SBI, which has a life insurance joint venture, SBI Life, is also in the process of finalising a venture partner for general insurance, according to Deepak Chawla, the bank’s Managing Director for new business, who was also present at the press conference.

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