SBI begins sale of non-core assets to grow capital base
State Bank of India (SBI) has started the process for selling some of its investments which are not critical to its core business in an attempt to shore up its capital base, two people aware of the development said. SBI has stakes in stock exchanges, depositories, clearing and warehousing corporations, and credit rating agencies. As a first step, the bank plans to hire a merchant banker to assist in the process.
In June, SBI raised ₹15,000 crore via a qualified institutional placement (sales to financial institutions), nudging up its capital adequacy ratio (a measure that looks at a bank’s capital in proportion to its loans, accounting for risk) to 13.31% as on June 30, from 12.85% as on April 1.
“Once a merchant banker is on board, we will look at which assets we can monetise, whether fully or partially. Since these are not fire sales, we want to have some kind of a timetable. From November, we should be able to go to the market,” said the first person, an SBI executive, on condition of anonymity.
In the past, SBI executives have said that monetizing noncore assets was one possible way of raising capital. This is in line with the government’s thinking that banks should sell non-core investments to improve capital adequacy ratio.
A spokesperson for SBI said that as mentioned by the bank’s chairman Arundhati Bhattacharya “on various platforms”, SBI would exit, wholly or partially, its investments in “noncore assets”. “There is a plan in place and we would do the transaction at an appropriate time. However we would not like to comment on an individual com- pany or transaction.”
SBI is divesting 8% in joint venture SBI Life Insurance Co Ltd’s IPO, which opened for subscription on Wednesday.
The lender has sought bids from merchant bankers who will help it identify interested parties to buy stakes in the identified strategic investments, a tender on the bank’s website said.
The lender has sought bids from merchant bankers who will help it identify interested parties to buy stakes in the identified strategic investments, a tender on the bank’s website said. While the names of these assets were not disclosed in the tender, SBI stated that it had invested in stock exchanges, depositories, clearing and warehousing corporations, and credit rating agencies.
SBI held 5.19% in the National Stock Exchange Ltd and 3.52% in Metropolitan Stock Exchange of India Ltd at the end of June. In July 2016, SBI sold a 5% shareholding in NSE for ₹911 crore.
SBI is also a shareholder in Smera Ratings Ltd, which is promoted by the Small Industries Development Bank of India.
The country’s largest lender also holds 21.20% in Clearing Corp. of India Ltd (CCIL), according to the latter’s fiscal 2017 annual report.