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Friday, August 25, 2006

SBH plans bonus, stock split before IPO

State Bank of Hyderabad (SBH) is planning to issue bonus shares to its parent, State Bank of India, followed by the splitting of its own stock in a bid to make its proposed maiden public offer acceptable to the market.

With a high EPS of Rs 2,476 and an abysmally low equity capital base of Rs 17.25 crore, SBH, the biggest and most profitable of all the subsidiaries of SBI, would find it difficult to market such a highly valued stock in the capital market. A bonus issue and a splitting of its Rs 100 face value shares would pare down its per share book value to a more acceptable level, Amitabha Guha, the managing director of SBH, said.

Guha is hopeful that Parliament would pass amendments to the SBI (Subsidiary Bank) Act, 1959 by Friday, enabling the bank to give effect to these proposals. The amendments were approved by the Cabinet in March.

As of now, SBH is not allowed to split its stocks, thanks to the Act’s restrictions, which requires its subsidiaries to have a minimum Rs 100 face value, a cap of 200 shares on individual shareholding, and a minimum SBI stake of 55%. "Once the amendment is through, we would work on changes in the capital structure of our bank and also start the process of launching the IPO. u

In all likelihood, the IPO would hit the capital market by December 2006," Guha said.

For the current financial year, the bank wants to achieve a bottom line of Rs 950 crore, up from Rs 427 crore earned in 2005-06. Last year, its total business touched Rs 56,738 crore.

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