State Bank of India has initiated steps to raise funds from capital markets in the current fiscal. While the bank has not specified the amount to be raised, analysts said it could be up to Rs 15,000 crore.
The bank has sought applications from merchant bankers for managing the issue. “The bank intends to tap capital markets via a QIP/FPO. The issue size may vary based on various factors including but not limited to management discretion and the decision of the shareholders,” SBI said.
The bank said it proposes to appoint up to 6 merchant bankers. Together they will be designated as Book Running Lead Managers (BRLMs). The last date for submission of bids for the Request For Proposal (RFP) will be May 22.
SBI has already taken the board’s approval for raising up to Rs 15,000 crore through various means in the current fiscal. In 2014, SBI has raised Rs 8,032 crore by selling shares via qualified institutional placement (QIP), largely aided by state-owned insurer LIC. The bank sold 5.13 crore shares at an average price Rs 1,565, which was the lower side of the price band it had set.
The government currently holds 62.22 per cent stake in the bank as of March 2017.
Many PSU banks are keen to raise funds from the market. The capital requirements under Basel III for PSU banks remain large in relation to the capital infusion of Rs 20,000 crore announced by the government for FY18 and FY19. ICRA’s estimates for total tier I capital requirements for PSU banks are estimated to be Rs 120,000-130,000 crore for FY18-FY19, of which
Rs 80,000-100,000 crore has to be CET-I and balance Rs 30,000-40,000 crore can be met through issuances of AT1 bonds.
“Some of the PSU banks which have weak capital position will face a vicious cycle of inability to grow the advances and the NII, because of capital constraints, while the operating expenses continue to grow. This will lead to further weakening of profitability and pressure on internal capital generation and hence further weakening of the capital position. The ability to control the operating expenses as these weaker banks face the challenge of growing advances and NII will be critical for their sustainability,” Karthik Srinivasan, senior vice president and group head — Financial Sector Ratings, ICRA, said.