Mumbai: The nation’s biggest lender, State Bank of India (SBI), said on Monday that it will offer to sell shares to stakeholders at a 35% discount in its first stock sale in a decade.
Fast forward: SBI chairman O.P. Bhatt. India’s biggest bank by assets is facing increasing competition from private and foreign lenders as credit demand grows in the world’s second fastest growing major economy.
The bank, 59.73% owned by the government, will raise Rs16,736 crore by offering one share for every five held at Rs1,590 apiece, a discount to its Rs2,437.25 stock price on 11 January.
The government will contribute Rs10,000 crore to retain its stake, it had said on 30 November.
Mumbai-based SBI’s shares, which have more than doubled over the past year on the Bombay Stock Exchange (BSE), ended 1.03%, or Rs25, higher at Rs2,462.25 on a day when BSE’s benchmark index, the Sensex, fell 0.48% to 20,728.05.
The 18-member Bankex index rose 70% in the past year.
“Getting subscription shouldn’t be a big effort for the bank as it offers good value as India’s biggest,” said Binay Chandgothia, who oversees $2 billion (Rs7,860 crore) of assets at Principal Asset Management Asia in Hong Kong, including SBI shares.
“The discount is a positive surprise and the rights will get subscribed from investors across segments,” he added.
Indian banks, led by ICICI Bank Ltd, sold a record number of shares last year to meet growing credit demand in the world’s fastest growing major economy after China, and to gain capital as the central bank plans to review policies to permit overseas banks to increase stakes in the country’s non-state lenders.
Non-state banks raised $8 billion selling shares last year. ICICI, SBI’s closest rival, garnered $5 billion in June, in India’s biggest ever share sale, while HDFC Bank Ltd raised about $700 million by selling American depository shares to strengthen its capital base and to support future growth.
The Sensex climbed 47% last year, rising for a sixth year for the biggest advance since 2003.
Investors have been attracted to Indian equities as the $906 billion economy grew at an average 8.6% in the past four years. The economy is estimated to expand 9% in the year to 31 March.
Overseas investors purchased a record $17 billion of shares in 2007, more than double the previous year.
SBI’s capital will grow to Rs650 crore from Rs526 crore, the bank said in a statement to BSE. The bank has a market value of $33 billion, after ICICI Bank’s $40 billion. ICICI is India’s second biggest by assets after SBI.
SBI, which has nearly 10,000 branches and 200,000 employees and controls nearly a quarter of the country’s banking business along with its associates, faces tough competition.
Private sector lenders ICICI Bank and HDFC Bank are stepping up their operations while foreign banks, such as Hongkong and Shanghai Banking Corp. (HSBC), Standard Chartered Plc. and Citigroup Inc. also have ambitious plans for India.
Reuters contributed to this story.