SBI picks 6 banks to manage Rs15,000-cr share sale
26 May 2017
State Bank of India, the country's largest lender by assets, has engaged six banks, including Bank of America Merrill Lynch, Deutsche Bank, IIFL, JM Financial, Kotak and SBI Capital, to manage a share sale that could raise up to Rs15,000 crore to shore up its NPA-laden finances.
Cash-strapped SBI also put up assets worth over Rs1,471 crore, including a Rs807-crore loan account of Kolkata-based Adhunik Power and Natural Resources Ltd and equity worth close to Rs200 crore.
A total 17 banks had bid to underwrite the so-called qualified institutional placement, for which SBI will pay a nominal fee of one rupee, IFR, a Thomson Reuters publication, reported.
The lender also chose IIFL Holdings Ltd., Kotak Mahindra Bank Ltd., JM Financial Ltd. and SBI Capital Markets Ltd. to work on the offering,.
SBI aims to start the share sale through an institutional placement of shares as soon as next month, reports quoting unidentified sources close to the development.
SBI is seeking capital to bolster loan growth after reporting fourth-quarter profit more than doubled. The offering comes as the Indian banking system battles a soured-debt ratio that's surged to the highest level since at least 2001.
The board of SBI in March approved fundraising of as much as Rs15,000 crore ($2.3 billion) through methods including an institutional share sale, rights offering and depositary receipt sale. The exact timing and size of any offering hasn't been finalized, the people said.
SBI also put up assets worth over Rs1,471 crore, including a Rs807-crore loan account of Kolkata-based Adhunik Power and Natural Resources Ltd and equity worth close to Rs200 crore, for sale to asset reconstruction companies (ARCs), according to a tender document on its website.
The largest among the loan accounts on sale is the Kolkata-based Adhunik Power and Natural Resources Ltd, where the bank is looking to sell loans worth Rs807 crore and equity worth close to Rs200 crore. This is the only high value account put up for sale.
Other corporate accounts up for sale include Shelter Infra Projects Pvt Ltd (Rs22 crore of outstanding loans), Shiva Texfabs Ltd (Rs320.7 crore), Surya World Education Research and Charitable Initiative (Rs47 crore), Rita Plastics Pvt Ltd (Rs21 crore) and Teracom Ltd (Rs54 crore). Of these, Shelter Infra has been put up on auction to be sold on an all cash basis.
According to the auction notice, SBI is inviting expressions of interest (EoI) from ARCs for the Adhunik Power account at a reserve price of Rs723 crore. Of this, the debt value is Rs699 crore and the equity value is set at Rs24 crore.
A consortium of 24 banks led by SBI have an exposure of Rs3,200 crore to the company which is classified as non-performing loans (NPA) with most lenders.
In its notice, SBI said that it has received approval from other lenders to Adhunik Power, including IFCI, Allahabad Bank, Oriental Bank of Commerce, Indian Overseas Bank, Dena Bank, UCO Bank, Punjab and Sindh Bank, Andhra Bank, Syndicate Bank and India Infrastructure Finance Co Ltd.
The sale of Adhunik Power's debt would be on a cash-cum-security receipts basis, where 15 per cent of the sale price would be paid upfront to the bank, while security receipts would be issued for the remaining 85 per cent.
In all other accounts, the bank is looking at paying a 5 per cent incentive amount to the ARC if the recovery is made within the first two years of buying the asset. If recovery is made in the third year, the incentive comes down to 4 per cent and becomes nil from the fourth year, the notice said.
SBI has asked ARCs to submit their expression of interest by 26 May and has asked them to finish due diligence of the underlying assets by 7 June. The process of e-bidding is expected to take place on 9 June, the notice said.