Sbi Plans To Wind Up Home Finance

The State Bank of India (SBI) is planning to wind up its Kolkata-based subsidiary, SBI Home Finance, by buying out the 30-odd per cent stake of financial institutions in the company at a nominal price of Re 1.

A senior SBI official said the institutions were not keen on injecting funds to re-animate the beleaguered arm.

"There is no point in allowing the outfit to drift considering its poor financials and limited resources for lending," said the SBI official.

The closure makes sense since SBI itself is pursuing home loans as a new product in its portfolio.

The bank will, however, need the Securities and Exchange Board of India's (Sebi) approval since the company is listed. SBI, which holds 30 per cent in the subsidiary, will have to make an open offer to the general public, who hold around 40 per cent in the arm, as per Sebi guidelines.

 

SBI had tried to revive the subsidiary's operations by infusing funds. In March 2000 it had injected Rs 210 crore, while in January 2001, it pumped in an additional Rs 200 crore. However, Home Finance's other institutional shareholders have not been inclined to do so.

On a turnover of Rs 18.89 crore for the first six months of 2001-02, SBI Home Finance reported a net loss of Rs 11.84 crore.

This was higher than the net loss reported in the corresponding period of the previous fiscal at Rs 9.95 crore. For the whole of 2000-01, the company reported a net loss of Rs 21.7 crore. The accumulated losses of Rs 60 crore in the year ended March 2000 wiped out the net worth of the housing finance outfit.

The failing health of SBI Home is due to the high level of defaults by corporates and construction firms. Further, the high cost of funds and financing of cash deficits through debt resulted in increased losses. The interest burden of the housing company during the first six months of the current fiscal has risen to Rs 26.55 crore. For the whole of 2000-01, the interest burden was Rs 53.21 crore.

SBI Home Finance was floated in 1993 jointly by the Housing Development Finance Company, Unit Trust of India, Life Insurance Corporation of India, General Insurance Corporation of India and SBI.