New Delhi, Oct. 10: The finance ministry plans to lift a current cap of 200 shares that a single investor can hold in any of State Bank of India’s subsidiaries, follow it up with a stock split in three of its subsidiaries — State Banks of Travancore, Bikaner & Jaipur, and Mysore — and finally come out with stock offerings of these three banks and that of State Bank of Hyderabad, which is as yet unlisted.
Finance ministry officials told The Telegraph that the government felt a stock split would help realise better value for these SBI subsidiaries as their shares, with a face value of Rs 100 each, were trading at Rs 3,670 for State Bank of Travancore, Rs 3,690 for State Bank of Bikaner & Jaipur and Rs 5,289 for State Bank of Mysore. These were too costly for retail investors.
The three listed subsidiaries will be allowed to come out with their public issues on which State Bank of India may or may not piggyback with small offerings of its overwhelming holdings in these banks.
The government also wants to allow SBI to shed a small portion of its 100 per cent holding in State Bank of Hyderabad, which could be followed by an offering in State Bank of Patiala, another subsidiary of the SBI.
State Bank of India, which owns majority shares in these subsidiary banks, could raise up to Rs 3,500 crore through small public offerings of its stock. An amendment to the SBI subsidiaries act allows SBI to sell up to 49 per cent stake in these subsidiary banks. But SBI is unlikely to sell more than 10 to 20 per cent stake in 100 per cent-owned banks and 5 to 10 per cent stake in listed subsidiaries.
“Once we manage to split the shares into Rs 5 or Rs 10 denomination, prices will become affordable for a retail investor and spur greater trading in these shares. Right now, there is little trading in these high-value shares as very few are in the market and there is an individual holding cap,” he said.
By doing away with the old restrictive norms which allowed an individual shareholder to hold 200 shares, the government hopes to attract high net worth shareholders as well as financial institutions and banks to hold reasonable chunks of shares of these banks.
SBI currently owns about 75 per cent stake in State Bank of Travancore, 92.3 per cent in State Bank of Mysore and 75 per cent in State Bank of Bikaner & Jaipur, besides owning 100 per cent in State Bank of Hyderabad and in State Bank of Patiala.
Besides these four, SBI also owns two other subsidiaries —State Bank of Indore and State Bank of Saurashtra. At one time, there were proposals to merge these subsidiaries with SBI and another to create a second state bank by merging these seven subsidiaries into one unit.
However, these proposals seem to have been shelved for the time being and consolidation moves, if any, will perhaps come only after a checkout of true valuations by unleashing their strengths on the stock market.
Officials said the three listed subsidiaries — State Bank of Travancore, State Bank of Mysore and State Bank of Bikaner & Jaipur — were likely to increase their capital bases by Rs 500 crore to Rs 800 crore through public offerings. They said right now State Bank of Hyderabad would be bringing out a subordinated bond of Rs 550 crore with a greenshoe option of Rs 50 crore to create tier II capital for itself.