Mumbai: Asian Development Bank (ADB) is exploring the possibilities of selling its 14 per cent stake in SBI Capital Markets Ltd, the investment-banking arm of the State Bank of India (SBI).
ADB has informally informed SBI of its intention to exit from SBI Caps. But no final decision has been taken so far. Currently SBI holds 86 per cent of equity in SBI Caps and the remaining 14 per cent is held by ADB, which took the stake at Rs 89 per share a few years ago.
Sources familiar with the development say ADB picked up stake in SBI Caps under the condition that the investment bank would go public after some years of its operations. But even after 16 years since its commencement, the SBI subsidiary has not been able to announce its initial public offering.
ADB feels under the current circumstances, SBI Caps will not go public in the near future. Besides, for the past few years, the business volumes of SBI Caps have reduced considerably. The merchant bank had plans for a public issue in 1997, which would have reduced SBI's stake to 51 per cent before this fiscal. However, this was put on the backburner owing to difficult market conditions at that time.
ADB, which had shown keen interest in picking up stake in Industrial Finance Corporation of India (IFCI) recently, has put IFCI privatisation as a precondition for picking up stake. The sources say SBI Caps is still globally hunting for a strategic partner, an exercise started around five years back.
''The investment bank is still looking at all options, including strategically placing a portion of its equity with a foreign investment bank, to cash in on the increased international activities of the domestic companies and their desire for an increased global presence,'' the sources add.
Currently all leading domestic merchant bankers, except SBI Caps, have tie-ups with foreign investment bankers, and this has helped them in cornering the bulk of the overseas business of Indian companies. Kotak Mahindra has tied up with Goldman Sachs, JM Financials has a joint venture with Morgan Stanley and DSP has a partnership with Merrill Lynch.