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| Government may cut size of SBI's rights issue |
| Press Trust Of India / New Delhi Aug 30, 2010, 00:49 IST |
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The government may cut the size of a rights issue sought by the country’s largest lender, State Bank of India (SBI), for raising Rs 20,000 crore to fund its business growth, as there is huge demand from the social sector on its resources.
The finance ministry is looking into the request of SBI and would take a view on the quantum after going through all the details, sources said.There are various possibilities, sources said, adding the government may cut the size depending on availability of resources.
The government recently got approval for spending an additional Rs 54,588.63 crore this financial year to meet the requirements arising from the Commonwealth Games, anti-Naxal operations and compensating the oil marketing firms.
The government holds a 59.41 per cent stake in the bank, after acquiring RBI’s stake in 2007. Earlier this month, SBI Chairman O P Bhatt had said, “We have sent a letter to government (for Rs 20,000 crore rights issue), so let’s see what happens.”
“It is up to them (government) to decide to participate (in rights issue) or not,” he had said. If a rights issue does not happen, the bank has the option to go for a preferential issue or follow-on offer, he had said.
A rights issue will normally not lead to a dilution of government equity in SBI. The government’s equity will only be reduced if it decides not to participate in the rights issue or does not fully subscribe to its quota.
At the same time, SBI has to put in money for subscribing the rights issue of its associate bank State Bank of Mysore, which intends to raise Rs 583.2 crore. SBI owns 92.33 per cent in the associate bank.
Thus, SBI would have to shell out about Rs 540 crore for subscribing to the extent of its holding. SBI has also agreed to pick up any unsubscribed portion of the retail shareholding.
The existing shareholders would get three shares for every 10 held as on the record date, which is September 4.
The shareholders would have to pay a premium of Rs 530 on the face value of Rs 10 a share.
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