State Bank of India (SBI), the country's largest lender, has put on hold equity issues by its seven associate banks for the next three to four months, the time it will spend to decide whether to merge them with itself or let them carry on independently for some more time. | |
| SBI feels the decision will not affect the capital needs of the associate banks as all of them have capital adequacy ratios of around 12 per cent, which provides them the room to support growth through debt capital (tier II) issues till then. The seven banks together had plans to raise around Rs 8,000 crore by March 2009. |
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| The four unlisted SBI associate banks, State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala and State bank of Saurashtra were planning to raise up to Rs 3,000 crore through initial public offers. The other three associate banks - State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore - were considering follow-on equity offers. SBI's stake in these three banks and State Bank of Indore varies between 75 per cent and 98 per cent. |
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| Y Vijayanand, deputy managing director & group executive (associates and subsidiaries), said "the seven associate banks need capital. One of the options is merger (with SBI). We have not decided the sequence yet. (We will examine) whether to merge the banks one after the other or all together or to continue with the banks' existence. We will see whether merging or listing adds more value in next 3-4 months." |
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| SBI was also considering to offer for sale a part of its holdings when the associate banks launch their public issues to generate liquidity for its own growth. |
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| SBI is also planning to list its proposed non-banking finance company, which will act as the holding company for its insurance and asset management businesses, on the lines of ICICI Bank's ICICI Financial Services. |
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| Bharati Rao, deputy managing director & chief credit officer of SBI, said "We are in the process of setting up an NBFC for our stakes in subsidiaries (insurance & mutual fund). In due course we will get the subsidiary NBFC listed. This will create value for SBI. The value lying unlocked will get reflected in SBI's valuation." SBI plans to initially sell about 10 per cent of the post-issue capital of the NBFC. |
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