Home/ Companies / LIC picks up one-third of SBI’s mega share sale

Mumbai: State-run insurer Life Insurance Corporation of India (LIC) on Wednesday bought shares worth around 3,000 crore in State Bank of India’s (SBI) qualified institutional placement (QIP) offering, virtually bailing out the issue.

Many public sector banks also picked up shares in the nation’s largest lender while response from foreign investors was tepid.

Through the biggest QIP ever, launched late on Tuesday evening, SBI is expected to raise 9,230-9,410 crore. LIC picked up about one-third of the issue. The share sale was aimed at bolstering the bank’s core capital.

“SBI is a wonderful stock. LIC bought shares worth around 3,000 crore. The final figures are yet to come in," said an insurance industry official with direct knowledge of the development. He declined to be named.

The issue was priced at its lower band at 1,565 a share, at a marginal discount to the bank’s Wednesday’s closing price.

Shares of the bank closed at 1,573.65 on BSE on Wednesday, down 1.4%, even as the bourse’s benchmark equity index, Sensex, lost 0.18% to close at 20,647.30 points. BSE’s banking index, Bankex, lost 0.69% to 11,937.04 points.

The offer, with UBS AG being the book running lead manager, closed on Wednesday, with a lukewarm response from investors, said bankers tracking the issue requesting anonymity.

The floor price for the sale, determined by the pricing formula of the capital market regulator Securities and Exchange Board of India (Sebi), was 1,629.35 per share. A company can offer shares to its QIP investors at a maximum 5% discount to the Sebi-formulated floor price.

A SBI official said, on condition of being unnamed, that the details of the QIP will be available only by Thursday as the book builders were still compiling the reports at the time of market closure. “The issue was scheduled to close at 8am on Wednesday but was open at least till 2pm."

“Not too many big foreign institutional investor or FIIs subscribed to the QIP," said one banker familiar with the development.

Even after the QIP, the government will still continue to hold at least a 58% stake in the bank as that was the pre-condition set by the SBI board before giving its nod.

As part of SBI’s fund-raising plans, the government is infusing 2,000 crore into the bank, which will ensure the government’s stake in SBI does not fall below 58%.

On 9 December, SBI informed stock exchanges of its board’s approval for a rights share issue worth 2,000 crore to the government. The board at that time also approved the bank’s proposal to raise 9,576 crore, including a premium, by selling equity in the market.

On 30 September, SBI’s capital adequacy under global Basel III norms stood at 11.69%, of which core capital was 8.73%. The December quarter numbers are yet to be released.

Before SBI, the last major QIP was launched in 2013 by private lender Axis Bank Ltd. The bank raised 4,726 crore through the largest QIP in India at that time.

The lacklustre response to SBI’s share-sale could be a setback for India’s ailing primary market.

According to Mint research, 34 companies raised 1,626.58 crore through IPOs in 2013, compared with 24 companies mopping up 6,953.32 crore in 2012. Thirteenr firms raised 4,084.48 crore through rights issues during 2013, down from 7,202.64 crore raised by 16 firms in the previous year.

During 2013, companies did manage to raise 8,008.24 crore through QIPs, compared with the 4,704.61 crore raised in 2012.

Anup Roy contributed to the story.

Anirudh Laskar
Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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Updated: 30 Jan 2014, 12:43 AM IST
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