BackSBI says waiting for ‘right time’ for share sale
Chairman Arundhati Bhattacharya says the plans and approvals are in place, and the bank is now waiting for stable markets to revive the plan
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Mumbai/Washington: State Bank of India (SBI), the nation’s largest lender by assets that was considering a ₹ 12,500 crore share sale earlier this year to boost capital, is waiting for stable markets to revive the plan, chairman Arundhati Bhattacharya said.
“We do have plans, we have all the approvals in place," she said in an interview in New York on 25 September. “We need to find a right time. Markets have been very volatile."
The lender had appointed advisers including Bank of America Corp. and Goldman Sachs Group Inc., to arrange the sale, people familiar with the matter said in February. SBI’s shares have dropped 23% this year, almost four times the decline in the 30-stock benchmark S&P BSE Sensex, amid rising bad loans and a global turmoil in stocks.
The 30-day historical volatility in the Sensex is at the highest level since October 2013 and is more than 50% above its six-month mean, data compiled by Bloomberg show.
SBI, which traces its roots back to 1806, was planning to raise the funds to boost credit and meet tighter capital requirements. The planned share sale would be the largest by an Indian lender since its own 2008 rights offering, which helped garner ₹ 16,740 crore, data compiled by Bloomberg show.
Soured debt
The bank saw ₹ 7,320 crore of consumer and farm loans go sour in the quarter through June, versus ₹ 4,770 crore in the previous three months. Bad-loan formation is always high for SBI in the June quarter due to seasonal factors, Bhattacharya had told reporters last month. The figure was ₹ 9,930 crore a year earlier.
The bank’s gross non-performing-asset (NPA) ratio widened to 4.29% from 4.25% in March, while provisions for soured debt fell 28% to ₹ 3,360 crore from the previous quarter.
Economic demand needs to revive for stressed debt levels to decrease, she said in the interview.
“It’s expected that in another maybe two quarters, we will be beginning to see the stress lessening," she said.
Insurance venture
Bhattacharya said the lender is planning an initial public offering (IPO) of its insurance unit in the next two years. In June, India’s biggest lender by assets had said it expects to complete a deal that would reduce its stake in a life-insurance venture with BNP Paribas Cardif SA to 49% by the end of next year.
“We probably would be looking for it in the next 24 months or so," Bhattacharya said. “That’s the kind of timeline we are looking at, give or take a few months here or there."
SBI owns 74% of SBI Life Insurance Co., as the venture is called, and BNP Paribas Cardif holds the rest. The two will soon begin the process of valuing the company so it’s too early to say how much the stake might fetch, and whether BNP Paribas Cardif will increase its ownership or an IPO will take place, Bhattacharya said.
The Parliament voted on 12 March to increase the amount foreign investors can own in the nation’s insurers to 49% from 26%. While majority ownership and control in the joint ventures will remain with resident Indians, the bill allows overseas companies to expand their presence in the world’s second-most populous country.
BNP Paribas Cardif, a unit of France’s biggest bank, indicated in March that it’s interested in raising its stake in the insurer. Bloomberg
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