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State Bank to shop for funds

Mumbai, April 20: The State Bank of India (SBI) plans to raise Rs 10,000 crore this fiscal to meet the high demand for credit and comply with the Basel II norms on capital adequacy from 2008-09.

The sum will be raised in several tranches as bonds or floating instruments having a minimum maturity of 60 months, SBI informed the Bombay Stock Exchange today.

The funds will be raised as debt, Upper Tier II and Lower Tier II subordinated debts through structured deals, private placement or book building, the bank said. Debts make up the Tier-II capital of a bank and equity the Tier-I capital. Upper Tier II debts have a higher rate of interest than Lower Tier II debts.

SBI has been borrowing heavily from domestic and international markets.

The funds will be used not only for providing credit but also for strengthening the bank’s overseas operations.

The bank recently raised the size of its medium-term note programme (MTN) to $5 billion from $2 billion and is planning to tap the equity markets with a follow-on offering.

SBI chairman .P. Bhatt had said the bank would float the public issue after Parliament approves the amendments to the SBI act that will bring down the stake of the Reserve Bank of India (RBI) in the bank to 51 per cent. The RBI has a 59 per cent stake in the bank and the act, at present, does not allow dilution of the stake beyond 55 per cent.

The central bank last year allowed banks to raise funds through innovative debt instruments. These include perpetual debt and perpetual preference shares which have the status of Tier I capital. There are also redeemable preference shares which have the status of Tier I capital. Both private sector and public sector banks have raised money through these routes.

Mahindra move

Utility vehicle manufacturer Mahindra and Mahindra (M&M) plans to raise up to Rs 1,350 crore to launch new products, expand capacity and make acquisitions.

M&M will raise up to Rs 1,260 crore ($300 million) from the global markets through equity shares or foreign currency convertible bonds (FCCBs). It plans to raise another Rs 90 crore through the issue of shares or other securities to qualified institutional buyers (QIBs).

The Mahindra board today approved the fund-raising plans, the company informed the BSE.

“The total amount to be raised by the proposed offer of securities and QIBs would not exceed Rs 1,350 crore,” M&M said.

The company will seek shareholders approval by a postal ballot, the results of which will be declared by June 4.

Only last week, Mahindra and Mahindra had said it would consider raising additional long-term resources for its present and future needs.

In March this year, M&M, along with its subsidiary Mahindra Holdings and Finance, won the bid to acquire around 43.5 per cent stake in Punjab Tractors (PTL) for Rs 360 a share in an all-cash deal.

The company has made an open offer to acquire an additional 20 per cent in PTL a deal which would cost around Rs 1,391 crore.

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