Mumbai: India’s largest lender State Bank of India (SBI) plans to raise up to Rs20,000 crore through a rights equity issue in 2010-11, about half the amount it needs to sustain growth over the next five years, chairman O.P. Bhatt said on Wednesday.
The bank would need to raise Rs40,000-50,000 crore to feed demand for loans over five years in the fast growing economy, Bhatt said.
“If we can raise half of it anytime during the next 12-18 months, it will be great,” he told reporters on the sidelines of a banking technology summit.
The rights offering will need the support of the government, which owns around 60% of the bank.
“Our rights issue can be successful only if government subscribes to it,” Bhatt said, adding the bank will start working with the government after the Budget on Friday that is expected to provide clarity on capitalization plan for state-run banks.
Shares of the bank, which has a market value at $26.3 billion (around Rs1.21 trillion), have dropped 15.5% so far this year, more than a 6.8% fall in the benchmark Sensex index.
Bhatt also said telecom firm Bharti Airtel Ltd is in talks with SBI to fund its $10.7 billion bid to acquire most of the African assets of Kuwait’s Zain Telecom.
“Bharti is in touch with us,” Bhatt said, but declined to give details on the quantum of loan sought by Bharti.
Bharti and Zain are in exclusive talks till 25 March for the proposed deal. As per the transaction, Bharti would buy Zain’s African assets except those in Morocco and Sudan.
Bharti had approached SBI last year, too, when the Indian telecom company was pursuing a deal with South Africa’s MTN Group Ltd, which did not go through.
SBI is also eyeing a significant stake in Tata Motors Finance, the vehicle financing arm of Ratan Tata-led enterprise Tata Motors Ltd.
“Our investment committee would like SBI to partner in the deal and invest some amount. Before that, however, we need RBI (Reserve Bank of India) clearance,” Bhatt said.
The public sector lender would pick up a significant stake but not a majority in the Tata group company, he said.
The deal would give SBI a huge synergy in terms of the commercial business of buses and trucks, he said.
“We will pick up a significant stake but not majority stake,” he added.
Bhatt also said his bank would set aside 60-70% of its annual capital expenditure for technology upgrading, including increasing reach through automated teller machines and mobile banking as well as strengthening risk management systems.
“It (spending on technology) could easily be hundreds of crores worth of investment. It will be significant. It will be 60% or 70% of the annual capex over the next two-three years,” Bhatt said.
He declined to give details on the bank’s average capital expenditure over the next two-three years.