SBI may opt for QIP in FY13

Govt stake to rise to 64% and Tier-I to 9% after Rs 6,000-crore fund infusion.

State Bank of India (SBI), which had received a commitment from the government for capital infusion of Rs 6,000 crore in the current financial year, may opt for another round of fund-raising through a qualified institutional placement (QIP) in the next financial year.

After capital infusion through the preferential allotment of equity shares, the government’s stake in SBI would rise from 59.4 per cent to 64 per cent, chairman Pratip Chaudhuri told Business Standard. The bank’s Tier-I capital would rise to nine per cent after the fund infusion, he said.

Yesterday, the finance ministry had written to SBI, asking it to secure all the necessary approvals from regulatory authorities for the Rs 6,000-crore fund infusion. The infusion would happen by March 31.

Chaudhuri said though the bank would not raise funds through the QIP route in 2011-12, it may explore the possibility in the next financial year. “We need to have the government’s approval for raising funds via a QIP,” he said. SBI may raise Rs 4,000 crore through the QIP.

While the QIP would also depend on market conditions, SBI is unlikely to offer any discount to investors.

SBI’s Tier-I capital had fallen to 7.47 per cent at the end of the September quarter, lower than the government’s comfort level of eight per cent, but higher than the regulatory requirement of six per cent. The overall capital adequacy ratio stood at 11.4 per cent, compared with the regulatory requirement of nine per cent.

“We will be comfortable with this capital infusion (from the government) and would not require any more funds from the government,” Chaudhuri said, adding the bank’s capital requirements could be met through a ploughback of profits.

SBI’s net profit is expected to exceed cross Rs 10,000 crore in the current financial year, the first time in the history of the bank. In 2010-11, SBI recorded a net profit of Rs 8,265 crore.

The bank’s capital adequacy took a hit in the fourth quarter of the previous financial year, as the bank had to provide around Rs 8,000 crore from capital reserves towards pension liabilities. Banks need the central bank’s prior approval to use their capital for provisioning.

In October, Moody’s Investors Service cut the stand-alone rating of SBI, flagging concerns over capital and rapid deterioration in asset quality. The agency cut its rating on SBI’s financial strength from C- to D+, and lowered its hybrid debt rating on the bank from Ba2 to Ba3.

The government would also infuse Rs 10,000 crore in other public sector banks in the current financial year.