Indian IPO

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Tuesday, September 04, 2007

SBI's FPO postponed

SBI's follow on public offer was expected to hit the market by the end of the year. In fact, a maximum of 9 percent stake could have been divested in the public issue.

The recent market volatility has prompted the Finance Ministry to go slow. We learn the Finance Ministry is worried that they may not be able to get the best price in the market. Also since there are only a limited number of shares on offer, it is not willing to take any risks

In the last few weeks banking stocks have had a tough time on the bourses. In fact ICICI Bank shares dipped below the FPO issue price. The government doesn't want the same to be repeated in SBI's case. Now if the SBI Act is amended, then the bank can issue 30,000 crore worth of preference shares and can also raise money through bonds.

Finance Ministry will also support a rights issue.

Sources say the Finance Ministry is waiting for the merger process of at least two of SBI's associate banks - State Bank of Saurashtra and State Bank of Patiala - to be completed, as it will improve valuations.

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