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SBI’s rights issue overcomes subprime scare; fully subscribed

SBI’s rights issue overcomes subprime scare; fully subscribed
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First Published: Tue, Mar 18 2008. 11 01 PM IST
Updated: Tue, Mar 18 2008. 11 01 PM IST
Mumbai: A $4.1 billion rights issue by State Bank of India, India’s largest bank, was fully covered on Tuesday, despite the global financial turmoil that knocked its shares down by nearly a third during the offer period.
“The offer has been subscribed,” said one banker involved in the deal. Another banker said it was “more or less” covered with the final tallying still going on.
Both the bankers declined to be named and said SBI was unlikely to make an announcement on Tuesday.
The state-run bank offered investors one share at Rs1,590 for every five held, looking to raise Rs16,736 crore to meet demand for loans in a growing economy. It was the bank’s first share sale in more than a decade.
Shares in SBI closed down 2.5% at Rs1,592.20, down 31% since the issue opened on 18 February, having fallen to a five-month low of Rs1,582.25 in the afternoon.
The sharp fall had hit sentiment and one banker said the retail portion was not fully subscribed and this was bought by large institutional shareholders. Retail investors own a little more than 5% of the bank.
The Bank of New York with a 7.42% stake through SBI’s global depository receipts and state-run Life Insurance Corp. of India with a 3.6% stake are the largest shareholders in the bank after the government.
The government said last month it would invest Rs9,996 crore to maintain its 59.73% stake in the bank.
Citigroup, CLSA India, Deutsche Bank, DSP Merrill Lynch, Kotak Investment Bank and SBI Capital Markets are the lead managers to the issue.
Indian banks have been raising funds to bolster their presence in the second fastest growing major economy ahead of a policy review next year that may allow foreign banks such as Citigroup and HSBC to buy local banks.
SBI had said last year it may need as much as Rs1 trillion over five years to boost loan growth.
Private lender ICICI Bank Ltd sold $5 billion of its shares in June last year, while smaller rival HDFC Bank Ltd plans to raise up to $1 billion by selling bonds.
The global equity sell-off triggered by the US subprime and credit-related writedowns along with fears of a US recession have hit fund raising plans of Indian companies.
The market turmoil has forced Indian firms such as Jet Airways, India’s top domestic airline, to delay a rights issue while smaller lender Dhanalakshmi Bank has extended the closing by a month.
Reliance Power Ltd, which raised $3 billion in India’s biggest initial public offer in January, slumped on debut last month and realty Emaar MGF called off a $1.6 billion IPO in February.
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First Published: Tue, Mar 18 2008. 11 01 PM IST