Mumbai: The country’s largest lender SBI on 14 January decided to raise Rs16,736.31 crore from its much-awaited rights issue, which will be priced at Rs1,590 a share.
According to a decision of the Central Board of the bank here, existing shareholders would be given a share for every five shares.
The price at which shares would be offered represents 36% of discount to State Bank of India’s current share price.
This means shareholders would get a share at a premium of Rs1,580, if face value of Rs 10 is considered, but at a discount of Rs 889, if today’s current price at Rs2,469 on the Bombay Stock Exchange is taken into account.
For the rights issue, the Bank also decided to raise its issued capital to Rs650 crore from the existing Rs526.30 crore.
The bank would also issue shares to employees under Employees Stock Purchase Scheme, SBI said in a filing to BSE.
The decision of the SBI’s board came one-and-a-half months after the Union Cabinet gave nod to the rights issue.
The issue would also be offered to existing SBI’s Global Depository Receipts (GDR) holders.
The Union Government is expected to invest around Rs10,000 crore in the rights issue to maintain its stake at over 59%, for which it would issue bonds to SBI.
“We have decided to subscribe to the rights issue. We intend to issue bonds of Rs10,000 crore for the purpose,” Finance Minister P Chidambaram had said after the Cabinet meeting, which approved the rights issue.
These bonds would be redeemed through the proposed Securities Redemption Fund, he said adding the SRF would be funded through taxes and dividends received from SBI.
Annual cost of servicing these bonds would come at around Rs790 crore, Chidambaram had said, adding the government is required to put at least this much amount to the redemption fund.
“We are subscribing to the rights issue, but we will pay to it on deferred basis,” he had said.
The bank has been exploring various options to mop up funds, but a rights issue would allow the bank to raise capital without diluting the government shareholding.
It is understood that the government was not in favour of a follow-on public issue, where its stake would have been diluted from the current over 59 per cent to 55 per cent, the minimum prescribed under the SBI Act.
Earlier this fiscal, the government purchased 59.7% stake of Reserve Bank in SBI in a revenue-neutral exercise.
SBI is the largest bank in the country, but ranks only 70th globally in terms of capitalization.