The Hindu Business Line : Holding co formation: SBI ‘putting everything in place’

Kolkata, Aug. 2 State Bank of India, on its way to form a holding company for its insurance and asset management ventures, will ensure that all legal issues, some of which had cropped up recently when the ICICI group initiated a similar plan, are adequately addressed.

SBI, which may allow a few strategic investors to take minor stakes in the company, is looking at a smooth formation, Mr O.P. Bhatt, Chairman, said.

The bank’s plan assumes significance in the context of the recent move by its peer, which had faced certain critical issues, at least temporarily.

SBI, which will in due course consider the possibility of listing the holding outfit too, intends to go ahead with its formation fairly early. The company will enable the bank to bring about greater synergy in its operations, it is felt.

Insurance, MF business

The holding company is aimed at SBI’s insurance and mutual funds businesses. The insurance company, a joint venture with Cardiff, is known to be making quick strides in a rapidly evolving market.

The funds business, a joint venture with Societe Generale, has recently crossed a crucial landmark on the AUM (assets under management) front. Both Cardiff and SG are large players internationally.

Credit, deposit growth

The bank on another front is targeting a credit growth of about 25 per cent and a deposit growth of about 20 per cent. It is also aiming to shore up its capital base adequately. As things stand, the Government’s share in SBI’s equity will not come down below 55 per cent. It is now roughly 59 per cent.

Incidentally, interest rates, the Chairman told newspersons while replying to a question, have more or less peaked.

SBI, one of the select players permitted by the pension regulator to provide pension fund management, is lining up a separate company for the purpose.

It intends to pursue the pension venture on its own and not tie up with any other entity, foreign or otherwise.

Holding co’s valuation

The proposed holding company’s valuation currently stands at about $7 billion, Mr Bhatt maintained, adding that the figure is based chiefly on the kind of business recorded by the State Bank group’s insurance company.

The valuation is ‘live’ — it is expected to change frequently with time — and is based on calculations worked out by the bank internally. The strategic investors that may be allowed to come in by the bank will hold 5-10 per cent in the proposed company.

The holding firm will account for a critical part of the State Bank group’s plan for the future, it is pointed out.

The group is soon expected to see some action on the subsidiaries, courtesy a proposal to start offering shares to the public.