SBI says needs capital for foreign buyout

State Bank of India (SBI) is getting proposals from merchant bankers to buy banks abroad and it will need capital whenever it comes across a good fit, chairman Om Prakash Bhatt said.

“A lot of merchant bankers are coming to us with proposals for a partial or full sale of banks abroad, if and when we find a good fit we will need money for that,” he said.

“We will need money quickly and would not have the time to raise capital so we are on a lookout for capital,” he said..

Bhatt said SBI’s planned mergers with its remaining six associate banks will give it enough reach domestically.

The bank is only looking at a suitable buy outside the country.
“It (acquisition) has to fit our price and business vision. India is globalizing fast because of the growth here and Indian companies are going out at an increasing pace. These companies look at Indian banks to help them with lending abroad. We being the largest bank, we have relations with all the big companies. We would want to service these companies abroad especially the once we have a joint venture or a MoU with,” he said.

Bhatt said if he got a bank with 100 branches in possibly Europe he would look at it.

On Wednesday, finance secretary Ashok Chawla had said that the government may dilute its stake in SBI to 55% from 59.40% currently, to enable it to raise more resources.

“The government will have to take the approval of the Cabinet to reintroduce the Bill in Parliament,” he said.

At current values, a 4.4% government stake in SBI is worth around Rs 4,800 crore, though it is unclear of how the government will dilute its stake.

The government may choose to either sell some of its shares directly in the market or SBI may do a rights issue in which the government does not subscribe.

Last year, SBI has sold shares to existing shareholders through a rights issue by offering 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.  

Bhatt said there are no proposals for rights issue currently, but reiterated the bank’s need for capital to feed loan growth and also for other businesses of the group like insurance, mutual funds and funding six associate banks.

Bhatt has already said that his bank will need about Rs 50,000-60,000 crore of capital in the next five years.

“(But) we do not need capital this financial year. Our capital adequacy is 14.25% higher than the 12% needed,” he said.

SBI has already announced plans to merge State Bank of Indore after merging State Bank of Saurashtra in August 2008. Bhatt said the merger will be completed in the next three to six months.