Rs 26,600 cr! SBI to divest stakes in subsidiaries, JVs, tap capital markets to raise funds

State Bank of India (SBI) plans to raise about Rs 26,600 crore from sale of non-core investments, stake in subsidiaries and also from the market to shore up its capital reserves this fiscal. The lender outlined its plans in a report to the parliamentary public accounts committee that is taking stock of the public sector bank recapitalisation.

India’s largest bank in its submission revealed that it plans to raise Rs 2,777 crore from the sale of non-core investments such as its investments in NSE, Sidbi, CDSL and other public bodies. The bank is currently exploring its options for offloading stake in these entities.

The lender will also look at divesting its stake in subsidiaries and joint ventures, through which it hopes to raise Rs 4,607 crore. These will be proceeds from the sale of SBI Life, SBI General, SBI Cards and SBI Caps. The bank has also revealed to the committee that it will raise AT-1 capital of Rs 8,000 crore, provided the market conditions are right. Equity capital of Rs 10,817 crore may also be raised by the bank during the year.

Last month, SBI announced its decision to offload 4% stake in its general insurance arm for Rs 482 crore to an alternative investment fund promoted by Axis Asset Management Co and PremjiInvest, the investment arm of Wipro Ltd’s chairman Azim Premji. A senior bank official said, “We need to augment our capital reserves on an ongoing basis.”

“We will explore all opportunities for this. With bank credit beginning to show revival, there seems to be an increased need to raise capital. But with the current situation of the market, we need to evaluate our options. But opportune stake sale and monetising investments will be undertaken,” the bank official said,

In October 2017, the government announced Rs 2,11,000 crore of capital infusion plan for public sector banks over FY18 and FY19. Of this, Rs 1,35,000 crore is proposed through the recapitalisation bonds, Rs 18,000 crore from budgetary support and Rs 58,000 crore to be raised by the banks from the market. The government infused Rs 88,139 crore of equity capital in PSBs in FY18 with SBI’s share of the  capital infusion being Rs 8,800 crore. However, the quantum of capital infusion for FY19 would depend on the government’s assessment of the bank’s performance in implementing the PSB reform agenda.

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State Bank of India is believed to be a front-runner in implementing the reforms agenda. SBI in its report told the committee that the bank will not make fresh investments in non-core activities and businesses. At the end of the first quarter ended June 30, the bank had tier-1 capital of 10.53% and the tier-2 capital of 2%.

Source: DNA Money