Mumbai: SBI Capital Markets Ltd (SBICAP), the investment banking subsidiary of India’s largest lender, State Bank of India (SBI), is sharpening focus on its private equity (PE) advisory business and tapping SBI’s debt-laden mid-size clients for business.
SBICAP, till April, used to offer PE advisory as “one of its services” but has now made it an “important vertical”, V.G. Kannan, president and chief operating officer of SBICAP said on the sidelines of an investor meet on Saturday.
Private equity firms present at the conference included the Carlyle Group, Everstone Capital Advisors and Aditya Birla Private Equity.
SBICAP has been very strong in capital markets, loan syndication and project finance, said Kannan. Recently, there has been a lot of action in the private equity space and it makes sense for SBICAP to strengthen this business, he added.
The March quarter saw PE firms make investments worth $929 million (around Rs.5,109 crore) across 66 deals, and 24 exits valued at $1,028 million, according to a 30 May MoneyTree India Report by PricewaterhouseCoopers Pvt. Ltd.
The I-banking (investment banking) subsidiary of SBI will be roping in mid-size clients of SBI who need funds but “are already well leveraged”, Kannan added.
The move, experts said, would help SBICAP generate more fees from the PE advisory even as it improves the quality of the bank’s loanbook. PE investors conduct a thorough due diligence of companies and the presence of a PE investor’s representative on a company’s board will improve the quality of corporate governance, said Deep Mishra, managing director, private equity at Everstone Capital Advisors.
SBI, the country’s biggest bank has the highest amount of non-performing assets (NPAs) among all other lenders in the country. As on 31 March, SBI’s NPAs stood at Rs.51,189.39 crore.
For starters, relationship managers of SBI in some major cities will be trained on the PE concept by SBICAP.
“As the relationship managers interact with a variety of customers exploring alternate fund raising options on a regular basis, it is pertinent that they are well versed with the PE space and the advantages it can offer to their mid-cap customer base,” said Kannan, adding that SBI has a tremendous brand value and tapping the business through SBI will help in reaching out to large number of potential clients very quickly.
SBICAP also said most of the relationship managers are not aware about PE investments and sometimes they end up lending too much to overly-leveraged firms.
The move is likely to spark a trend among other public sector investment banks who have not dabbled much in PE space.
“The banking industry waits for a signal from SBI for any major decision like interest rate increase or cuts. The initiative by SBICAP is likely to have a similar impact in the I-banking space,” said Sunil Kumar Jain, investment prinicipal at Aditya Birla Capital Advisors Pvt Ltd.