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Tuesday, May 01, 2007

SBH to go public after September

State Bank of Hyderabad (SBH), the largest associate bank of State Bank of India (SBI), intends go public after September 2007. The issue size is still undecided at this stage.

SBI holds 100% in SBH, which is preparing the groundwork for the proposed public issue in anticipation that the State Bank of India (Subsidiary Bank Laws) Amendment Bill will get Parliament clearance soon.

The cabinet has already given in-principle clearance. SBI has seven associate banks. All will stand to benefit once the Bill is enacted in Parliament. This will allow the seven associate banks to split their shares with face value of Rs 100 each to Rs 10 each.

That will also remove the present cap on individual shareholding limit of 200 shares in these banks. The stock-split exercise will improve shareholder value in these banks. At present, four of the seven associate banks — SBH, State Bank of Patiala, State Bank of Saurashtra and State Bank of Indore — are unlisted. On the other hand, State Bank of Travancore, State Bank of Mysore and State Bank of Bikaner and Jaipur are listed.

Following the stock-split exercise, SBH may also issue bonus shares to its parent to improve valuation of the shares before the IPO. SBH managing director Amitabha Guha refused to comment on the possibility of a bonus issue. He, however, admitted that the possibility for an IPO is brighter by several notches. “If the market remains favourable, we plan to go public around October 2007. The book value of SBH is currently at Rs 14,900 crore,” Guha said.

It is, however, still undecided how far SBI will dilute its holding in SBH. SBI is also likely to dilute its holding in State Bank of Patiala soon. The dilution of share in two of the associate banks will unlock huge value for SBI. The seven associate banks have a combined business of Rs 3.42 lakh crore. And SBH alone had a business mix (deposits and advances) of Rs 71,400 crore as on March 31, 2007.

SBH is aiming at 25% business growth for 2007-08. The bank is well capitalised with 12.5% capital adequacy ratio. “This fiscal, we have the option of raising Rs a total of Rs 1,000 crore by way of subordinated and perpetual bonds,” Guha said, reports The Economic Times.

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