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State Bank of India (SBI) will be seeking shareholders’ approval to raise up to ₹20,000 crore by way of a public issue, including a follow-on offer and private placement. A general meeting of SBI’s shareholders is scheduled for July 14.
In a regulatory filing, India’s largest bank said that based on the assumptions of growth in Risk Weighted Assets and plough-back of profits, it may require to raise additional capital during FY21.
In an environment of heightened uncertainty caused by Covid-19, the RBI is of the view that banks must conserve capital to retain their capacity to support the economy and absorb losses, it added. “Further, the bank requires adequate capital to match the anticipated growth in assets and comply with the stipulated level of capital adequacy, especially on account of the requirement of Capital Conservation Buffer, i.e., additional 0.625 per cent, by September 2020, (and)...Counter Cyclical Capital Buffer in the range of 0- 2.50 per cent, depending on the RBI announcement, which may come with a lead time of four quarters,” SBI said.
Earlier attempts
The bank’s attempt to raise equity capital of ₹20,000 crore during FY19 and FY20, by the issuance of common equity to investors other than the Government of India (GoI), did not materialise as the market conditions were not conducive, said the filing.
The approval of the RBI and the GoI for raising further equity capital was in place till March 31, 2020, while the shareholders’ approval for the same expired on December 6, 2019.
“Therefore, the Board of Directors has accorded approval for extension of the validity period for raising equity capital up to ₹20,000 crore from the market by way of an FPO/QIP/preferential allotment/rights issue/any other mode or a combination of these, till 31st March, 2021,” the filing said.
According to the BSE filing, SBI plans to mop up the resources via a follow-on public offer or private placement, including QIP/GDR/ADR or a combination of these instruments, as decided on by the board.
This resource raising exercise is subject to the condition that the GoI’s shareholding in the equity share capital of the bank does not fall below 52 per cent at any point of time.
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