BackSidbi to raise ₹10,000 crore from rights issue next fiscal to expand equity capital
The proposed rights issue will be carried out in two tranches of ₹5,000 crore each next fiscal to expand its capital base by ₹10,000 crore and support the growing balance sheet, which is expected to rise by a quarter from the present, Sidbi chairman and managing director Sivasubramanian Ramann said
PremiumSmall Industries Development Bank of India (Sidbi) chairman and managing director Sivasubramanian Ramann, said the SME loan’s refinancer is eyeing to float a ₹10,000-crore rights issue next fiscal to expand its equity capital as it expects to grow assets to ₹5 lakh crore by March 2024 from about ₹4 lakh crore in March 2023, PTI reported.
The proposed rights issue will be carried out in two tranches of ₹5,000 crore each next fiscal to expand its capital base by ₹10,000 crore and support the growing balance sheet, which is expected to rise by a quarter from the present, the Sidbi chairman said.
"We recently had moved the department of financial services seeking to raise capital. Following this they moved the standing committee of Parliament which has suggested a capital support of ₹10,000 crore to us next fiscal so to provide us with more lending support to SMEs," PTI quoted Sivasubramanian Ramann as saying.
On the rising direct lending level, the Sidbi chairman said the share of direct lending of the company is only 14% now, but the company expects the share of direct lending to grow to 25% over the next three years.
"My objective is to take this to a quarter (25 per cent) of the total book over the next three years, said Raman who was with the capital markets regulator Sebi before joining Sidbi.
The share of company’s refinancing is still about 86%.
Sidbi's capital adequacy ratio (CAR) came down to 19.29% in FY23 from 24.28% in FY22, according to the annual report which explained the fall to the effective capital utilisation to increase the portfolio of the bank. This again fell to 15.63% as of the June 2023 quarter.
However, according to rating agency Icra, this capitalisation level is comfortable as it is supported by lower risk weights for the refinance book.
The company’s asset base grew 63% from ₹2,47,379 crore in FY22 to ₹4,02,383 crore in FY23, while its income rose a full 102% in the year to ₹18,485 crore, from which it booked a net income of ₹3,344 crore, which was 71% more than the year-ago number.
Given the sharp growth partly driven by higher refinancing requirements due to tightening liquidity conditions, Sidbi's leverage rose to 14.36 times as of March 2023 from 9.22 times as of March 2022, the rating agency said.
However, leverage remained within the regulatory permissible level, which was 18 times. The Icra expects the borrowings to increase and so is leverage, although it is likely to remain within the allowed limit of 18 times until March 2024.
The central government owns 20.8% in Sidbi, while the SBI holds 15.65% and the LIC 13.33%. The rest of the equity is held by other public financial institutions and banks. The shareholders will subscribe to the proposed rights issue.
The lender's loan growth optimism comes from the demand for direct financing that is growing by leaps and bounds, which two years ago was only 7% of its book but is now 14%.
According to the RBI data, the SME loan book of commercial banks as of March 2023 stood at ₹25 lakh crore, while the total credit market stood at a little over ₹145 lakh crore.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
