SBI raises $1.2 billion in share sale - sources

MUMBAI Wed Jan 29, 2014 10:02pm IST

Auto rickshaws wait in front of the head office of State Bank of India (SBI) in New Delhi August 12, 2013. REUTERS/Anindito Mukherjee/Files

Auto rickshaws wait in front of the head office of State Bank of India (SBI) in New Delhi August 12, 2013.

Credit: Reuters/Anindito Mukherjee/Files

Related Topics



MUMBAI (Reuters) - State Bank of India raised $1.2 billion through a share sale, sources with direct knowledge of the deal said, falling short of its $1.5 billion target and clouding the outlook for equity offerings by other banks in a slowing economy.

India's biggest lender, which accounts for a quarter of the country's loans and deposits, plans to use the proceeds to boost its domestic and overseas banking operations.

Investors, both foreigners and domestic, bought roughly 50 million shares out of nearly 59 million on offer at 1,565 rupees each, the lower end of the price band, the sources said on Wednesday.

Demand for SBI shares, particularly from foreign investors, was not strong because of concerns about the bank's asset quality and earnings growth as an economic slowdown curbs demand for loans, three sources with direct knowledge of the situation said.

Indian banks, mainly state-run such as SBI and Punjab National Bank (PNBK.NS) with high exposure to the power and infrastructure sectors, have seen a sharp surge in bad loans in the past couple of years.

The Indian central bank's surprise move on Tuesday to raise policy interest rates by a quarter percentage point to 8.00 percent also dented investor demand for SBI shares, the sources said.

Foreign investors, typically the biggest buyers of Indian shares in such offerings, bought about $250 million in SBI shares, while state financial institutions including Life Insurance Corp of India Ltd were the biggest buyers, the sources said.

"The timing of the issue was not right. The overall market sentiment turned weak in the last few days, and the rate hike by the central bank is also negative for banks," said Jagannadham Thunuguntla, chief strategist at SMC Global Securities.

"State-run banks have not been on the investors' radar for quite some time due to asset quality worries," he said. "This will now put pressure on the government to infuse more capital into the public sector banks."

In September, Moody's Investors Service downgraded its rating of SBI's senior unsecured debt to Baa3, the lowest investment-grade rating, from Baa2. It changed its outlook on SBI's financial strength to 'negative' from 'stable', citing worsening asset quality and dependence on a fiscally strapped government to maintain its capital base.


A recent directive by the market regulator to cap the allotment of shares to a maximum of 49 institutional investors in an equity offering also contributed to SBI's falling short of its target, two separate sources with direct knowledge said.

All the sources declined to be identified ahead of a public announcement. SBI Chairwoman Arundhati Bhattacharya could not immediately be reached for comment.

A large number of Indian companies including state banks have delayed their share sales due to poor investor sentiment and sluggish corporate earnings growth.

The BSE Sensex is down 2.5 percent this year. SBI stock lost more than a quarter of its market value in 2013 and is down nearly 11 percent this year.

Citigroup (C.N), HSBC (HSBA.L), JPMorgan (JPM.N), Bank of America Merrill Lynch (BAC.N), Deutsche Bank (DBKGn.DE), UBS AG UBSN.VX and SBI Capital, the investment banking unit of State Bank of India, managed the SBI offering.

(Reporting by Sumeet Chatterjee; Editing by Anupama Dwivedi and Jane Baird)


Economic Survey

Reuters Showcase

Asian Shares

Asian Shares

Oil's drop chills Asian stocks, inflation data boosts dollar  Full Article 

Legal Complaints

Legal Complaints

Government's payday from telecoms auction could be delayed  Full Article 

Rail Budget

Rail Budget

India aims to invest $137 billion in railways in next 5 years  Full Article | Full Coverage 

Gold Market

Gold Market

Gold holds up on Chinese demand, set to snap 4-week losing run  Full Article 



StanChart board clearout is only the first step  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage