By Devidutta Tripathy and S.Anuradha
MUMBAI/SINGAPORE Top Indian lender State Bank of India's (SBI.NS) share sale to institutional investors to raise as much as $2.33 billion was fully covered within hours of the launch on Monday, three sources with direct knowledge said.In a bid to shore up its capital base, the bank is selling new shares in a price range of 275.76 rupees to 287.25 rupees a share in the biggest ever qualified institutional placement (QIP), according to a deal term sheet seen by Reuters. The price range is a zero to 4 percent discount to the stock's closing price of 287.25 rupees on Monday.SBI's share sale comes as Indian banks face raising billions of dollars in new capital by March 2019 to meet global Basel III banking rules. Lenders will also need more capital as they make higher provisions for bad loans.The bank, which merged its five subsidiary banks with itself and also took over a niche lender to women effective April 1, has seen its Common Equity Tier 1 capital ratio fall to 9.41 percent from 9.82 percent before the merger.
Both foreign and local funds have bid for shares in the lender, which accounts for more than a fifth of India's banking assets, the sources said. The sale closes at 7 a.m. India time on Tuesday.SBI did not immediately respond to requests for comment.
The share sale will lead to an up to 6.7 percent dilution of existing share capital and an up to 6.3 percent of the post-issue capital, according to the term sheet.The bank last sold shares to institutions in January 2014 to raise about $1.2 billion.A successful share sale by SBI will take some pressure off the Indian government which owns a majority in 20-plus lenders, and every year injects capital in those banks.
With bad loans in the sector soaring and the Basel III capital needs in place, analysts have said New Delhi will have to significantly increase its planned 700 billion-rupee recapitalization of state banks through four years to March 2019.Many of SBI's peers are trading below their book value and are not investor favorites with their weak financials and high bad-loan ratios. Bank of America Merrill Lynch, Deutsche Bank, IIFL, JM Financial, Kotak Investment Banking and SBI Capital Markets are managing the SBI share sale. (Reporting by Devidutta Tripathy and S. Anuradha of IFR; Additional reporting by Manoj Rawal; Editing by Rafael Nam and Susan Fenton)
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Published Date: Jun 05, 2017 10:45 pm | Updated Date: Jun 05, 2017 10:45 pm