The maiden public issue of State Bank of Travancore (SBT) has received an oversubscription of 2.5 times the issue size despite depressed secondary market conditions and shares of other banks quoting lower prices. Sources state that fundamentals of SBT and its strong parentage made the shares an attractive buy.
The issue, aggregating Rs 69.24 crore, was priced of Rs 600 including premium of Rs 500 per share. Sources said that of 2.5 times of over subscription, one times the issue size was subscribed by financial institutions and banks.
The huge oversubscription is indicative of the fact that good issues command a premium in the market. With a high demand for the share in the primary market, the SBT scrip is expected to be listed at a premium. Most of the bank issues have been listed at a premium to the issue price. The oversubscription has confounded the analysis that the issue will not be subscribed as the Bank of India issue was available at a lower price of Rs 34 in the market.
All bank issues have been oversubscribed in the primary market which indicates an appetite for quality issues. Says a sources, issues like that of Bank of Baroda for SBI and its associates are picked up on the basis of goodwill that these institutions have built over years. The investors in these issues hold the scrip for the long term.
The issue, which opened for subscription on December 8 and closed on December 15, will be listed at National Stock Exchange, Chennai, Kochi and Bombay Stock Exchanges.
In post shareholding pattern, State Bank of India, will hold 75 per cent of SBTs total equity. SBI has also picked up 3.46 lakh equity shares on firm allotment basis, while the balance 11.54 lakh is offered to public. The issue had 20 per cent reservation amounting to 2,30,800 shares for NRIs and OCBs on repatriable basis which was subscribed. The 10 per cent reservation for employees amounting to 1,15,400 shares too was subscribed by employees, said sources.
The earning per share as of March end 1997 was Rs 114.97 and the book value was Rs 596.67.
The P/E multiple at the issue price of Rs 600 per share works out to 5.22 on basis of 1996-97 earnings.
