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Our Bureau

Expects to create immense value for itself

Kolkata , May 19

State Bank of India has firmed up proposals to unlock value in its seven subsidiaries, in some of which it accounts for the entire shareholding. The bank expects at least a few of its subsidiaries to raise resources in one form or another over the next few months.

While SBI subsidiaries such as State Bank of Mysore and State Bank of Travancore are listed entities, some of the others are not in the public domain at all — a situation that Mr A.K. Purwar, Chairman of SBI, wants to change in view of their potential for further growth.

"Our subsidiaries have greatly improved their workings in terms of business size, asset quality and profitability," he said while referring to the fact that the seven entities put together will probably occupy the second position (that is, after parent SBI) in the Indian banking industry.

SBI expects to help create immense value for itself by unlocking its holdings in the smaller banks. This will be done in stages.

At this juncture it is not certain as to which one of these will be first off the block. The method of unlocking value has also not been worked out so far.

The premier bank is aware that the publicly-listed subsidiaries command very low trading volumes. This is evident from the number of trades that their stocks normally witness on the Bombay Stock Exchange. On Friday, for instance, State Bank of Travancore (which closed at Rs 4,470 on the BSE) saw a total traded quantity of less than 300.

All the subsidiaries are fully on core banking solution and are the only seven public-sector banks that are entirely networked, it is pointed out. These form a major part of the `SBI group', which also includes a clutch of non-banking outfits. Among the latter are companies such as SBI Life, SBI Fund Management and SBI Capital Markets.

Group's profit

The SBI group, as things stand, has recorded a market share of 23.98 per cent in deposits and 23.46 per cent in advances. The group's net profit has increased from Rs 4,199 crores in fiscal 2003 to Rs 5,529 crores in fiscal 2006.

"The virtual merger among SBI and the group entities is almost complete," Mr Purwar told newspersons, adding that there is a high level of coordination between the banks.

Of the non-banking entities, SBI Capital Markets is expected to play a key role in the years ahead, thanks to its pre-eminent position in the loan syndication business. Further, the company's own stock broking subsidiary will be scaled up to cover more centres. The target here is to become among the top three brokerages in the country.

More Stories on : Public Sector Banks | State Bank of India | Outlook

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