SBI rights issue

The Union Cabinet is likely to take a call by November 22 on State Bank of India`s proposed plan to raise about Rs 18,000 crore through a rights issue.

"We have prepared a cabinet note and it will be taken up at the cabinet meeting either on November 15 or November 22," said official sources.

Incidentally, the winter session of parliament is beginning on November 15 and the government will have to get the parliament sanction to subscribe to the issue, which is likely to cost the government about Rs 10,000 crore. The bank is likely to raise Rs 17,000-18,000 crore through the rights issue to meet regulatory requirement and business growth, the sources said.

Although the rights issue would not change the shareholding pattern, the unsubscribe portion of the issue by existing retail shareholders could increase the government share in the country`s biggest lender.

The government`s stake in SBI, which is currently at 59.73%, could go up after the rights issue, if some investors did not take up the offer. Retail investors currently have around 4 % shares in SBI.

As SBI`s share price is currently ruling at over Rs 2,000, some investors, especially retail ones andmay not subscribe to the rights offer. The government`s holding in SBI may go up to 61-62 %, depending on the unsubscribe portion of rights issue, the sources said.

SBI shares closed down Rs 22.15 at Rs 2,162.50 at the end of Muharat trading on Friday against Rs 2,184.65 in the previous day.

SBI chairman O P Bhatt had earlier said that the bank needs not only the growth capital but also the funds for implementation of Basel II norms, which benchmark the quantum of capital that a bank is required to put aside for covering the financial and operational risks.

"The bank requires close to Rs 5,000 crore just for meeting Basel II norms," he had said.

The Reserve Bank of India has asked all banks having overseas operations to be Basel II compliant by March 2008.

"We also need capital for complying with AS15 (accounting standard 15 norms relating to employees statutory dues). Banks like SBI would require between Rs 4,000 crore to Rs 5,000 crore. These two needs (Basel II and AS15) alone would require Rs 10,000 crore," bhatt had said.

According to government estimates, SBI needs to raise around Rs 89,600 crore over the next five years.

SBI has witnessed a 36.04 % rise in net profit at Rs 161.14 crore during the second quarter this fiscal against Rs 118.44 crore in the corresponding period of 2006-07.

Total income rose by 33.42 %to Rs 1,365.82 crore during the quarter ended September 30, 2007 from Rs 1,023.73 crore in the second quarter last fiscal.