‘SBI rights issue likely FY 11 March quarter’

‘SBI rights issue likely FY 11 March quarter’

Mumbai: India’s largest lender State Bank of India (SBI) plans to hit the market with a rights issue of about Rs20,000 crore ($4.34 billion), likely in the fiscal quarter ending March 2011, two sources with direct knowledge of the matter told Reuters on Monday.

“We have been talking to the government (regarding the rights issue)," one of the sources said. “So formally, we will take it up after this quarterly results, (likely) in the next two weeks," the source said.

The sources declined to be identified.

In June, SBI chairman O.P. Bhatt said the bank expects to launch the rights issue towards the end of fiscal year 2011.

The government holds a 59.4% stake in SBI.

Shares in SBI were trading at Rs2,645, up nearly 1%, in mid-morning on the Bombay Stock Exchange.

“You have to see at what price the issue is coming up. We like the stock and we already have a buy on it," said Gaurav Dua, head of research at brokerage Share Khan.

The bank will announce its June quarter result on Thursday.

Holding Less

Last week, the Lok Sabha, the lower House of Parliament, approved a bill that enabled government to reduce its holding in the bank to 51%, helping facilitate capital raising for the country’s largest lender.

Under current regulations, the SBI Act allows the government to hold a minimum of 55%.

The formal notification from the government will come after the President of India assents the bill.

In 2008, SBI had raised Rs16,736 crore from a rights issue to meet its funding requirements.

The bank in its latest debt issue raised $1-billion through sale of 5-year bonds overseas.

SBI is also planning to issue retail bonds to raise around Rs250 crore by December, the second source said.

“We will be doing this most probably this quarter or next quarter," the person said.

The lender is currently discussing the modalities of the bond issue including the tenure of papers, the source said.

“There can be many instruments. You can have a 10-year instrument with a put option of five years and 15-years with a put of 10-years," the source said.