The Hindu Business Line : State Bank of Mysore’s stock split plan on hold

Spokes in the wheel
SBM proposal for splitting the shares into a face value of Rs 10 per share so as to make them more liquid yet to get approval.
Rs 16,000 crore rights issue by SBI soon this year
Swap ratio valuation, consolidation process for merger under way.

C. Shivkumar

Bangalore, Jan. 17 The proposed stock split of State Bank of Mysore (SBM), associate bank of State Bank of India, is on hold for this year.

SBI sources said that the planned stock split is yet to be approved. Along with this, the planned equity floats by some of the SBI subsidiary banks are also on hold, the officials said.

The public holding in SBM’s paid-up equity of Rs 36 crore is currently 7.67 per cent. This includes insurance companies’ stake of 1.64 per cent. The remaining 92.33 per cent is held by SBI.

SBM scrips currently have a face value of Rs 100 per share.

The bank had proposed splitting the shares into a face value of Rs 10 per share so as to make them more liquid. This was also intended to give SBM the flexibility to make an equity float for augmenting capital.

The sources said that the proposals are delayed in view of the SBI rights issue amounting to over Rs 16,000 crore during the current year.

Consolidation move

Officials added that the delay in approvals for the equity floats are also linked to the proposed consolidation of the SBI and its associates into a single entity. So far, only State Bank of Saurashtra is to be merged with SBI, which the boards of both the banks have already cleared. The proposal is now awaiting approval from the Union Cabinet.

Swap ratio

While in the case of unlisted banks, the consolidation was through outright merger, in the case of publicly listed banks like the State Bank of Mysore, State Bank of India would have to fix a swap ratio, the sources said. Valuations for the swap ratios have not yet started.

However, any valuation and subsequent consolidation is expected to be done without recourse to the Companies Act. This is because SBI and its subsidiaries are covered under a separate statute, the SBI Act of 1955 and the SBI Subsidiaries Act of 1955. The SBM scrip is currently trading at Rs 12,776.

Consolidated accounts

Sources said this year onwards, SBI is expected to present a consolidated balance sheet for itself and its subsidiaries. Besides, at the operational level some level of consolidation has already taken place.

For instance, customers of the SBI subsidiaries are also treated as customers of SBI. Besides, the officials said that SBM is also expected to comply with Basel II norms by March end this year, as in the case of the SBI, though it has no foreign operations.

The deadline for compliance with Basel II guidelines for banks with external operations is March 2008. For all other banks, it is March 2009.

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