Guha: Fund search

Calcutta, April 29: The State Bank of Hyderabad (SBH) plans to tap the market with an initial public offering in September or October.

The bank expects the State Bank of India Subsidiary Bank Act, 1959, to be amended in this session of Parliament, paving the way for the IPO. The proposal to amend the act has been cleared by the standing committee on finance and the cabinet.

“We are expecting the act to be amended in this session of Parliament. We will then chalk out the details of dilution, issue size, and premium. After the notification, it will take us another three months to start the process,” Amitabha Guha, managing director of the State Bank of Hyderabad, said.

The amendment will enable entities to own more than 200 shares of the bank, which is the existing ceiling. SBH is held entirely by its parent, State Bank of India.

The bank is technically Basel II compliant and is set to meet the SBI deadline of September 2007.

“However, in the worst case scenario, our capital adequacy ratio, which is at 12.5 per cent against a statutory requirement of 9 per cent, could come down to 10 per cent after the Basel II norms are implemented if the voluntary rating of loan accounts do not go as planned. In such a scenario, the public issue will help us keep up the rate of 12 per cent and also our pace of growth,” Guha added.

The bank recorded a 25.71 per cent growth in business at Rs 71,000 crore in 2006-07. It is targeting a business of Rs 1 lakh crore by the end of 2007-08. SBH aims to increase its client base from 75 lakh to 90 lakh this fiscal.

The gross NPA is also expected to be less than 1 per cent of total advances this fiscal. It was brought down from 2.13 per cent of gross advances to 1.23 per cent.

Subsidiary merger

A proposal is being examined on the proposed merger of the subsidiaries of SBI. “But no timeline has been set. The mode of the merger has also not been decided. The merger will bring in greater synergy,” sources said.

However, it is expected that before the RBI relaxes its licensing rules to enable foreign banks to open branches by 2009, some decision on consolidation will be taken to provide the scale of operations to SBI.