SBI seeks to raise ₹15,000 cr from institutional share sale
Sets floor price at ₹287.58 per share, aims to increase loan book
MUMBAI: State Bank of India (SBI) launched the country’s largest institutional share sale programme on Monday, aiming to raise up to ₹15,000 crore as it looks to strengthen its capital base to increase loan growth as well as cushion the balance sheet from stressed loans.
With this issue size, SBI has broken its own record. Its ₹8,000 crore issue in January 2014 is so far the biggest institutional share sale. Coal India Ltd’s ₹15,200-crore new share sale in 2010 is the largest equity fund raise in India so far.
In a notice to the exchanges on Monday, SBI said the floor price for the so-called qualified institutional placement (QIP) has been set at ₹287.58 per share.
The bank is open to offering up to a 5% discount on the floor price. SBI shares closed little changed on Friday at ₹287.35. At the floor price, SBI will issue 521.6 million shares if the issue is fully subscribed.
In March, SBI had got approval from its central board for raising up to ₹15,000 crore during the current fiscal through various routes such as an institutional share sale, rights offering and depositary receipts, among others.
“There is strong demand for the book and it should be comfortably subscribed. Investors looking at subscribing are mostly long-only investors such as pension funds and insurance firms, both domestic and foreign. The book will also see subscription by hedge funds,” said a person involved in the SBI QIP, on the condition of anonymity.
Given the liquidity flowing into markets, raising such a large sum through the share sale will not be a problem for SBI, said another person involved in the QIP.
“There is a lot of money flowing in the FII system as well as domestic system, and investors are looking for quality paper. Between the last QIP and now, the SBI stock has almost doubled. So, investors who came in the last QIP have been rewarded handsomely. Investors are also keen as they have seen how the management has created value in some of the subsidiaries such as SBI Life,” this person said.
Analysts said that after witnessing sluggish demand for loans in the previous fiscal, SBI would be keen on growing its book and this capital raise would help the lender.
“Part of this capital will be to meet growth opportunities and part of it for the expected rise in credit cost (percentage of provisioning against the total advances). State Bank of India is seen as among the few state-owned banks that will be able to grow its loan book, given the asset quality issue faced by its peers,” said Udit Kariwala, financial institutions analyst at ratings company India Ratings.