The State Bank of India has begun selling new shares worth up to $1.495 billion according to a term sheet seen by FinanceAsia, to help bolster its balance sheet.
Indian banks have been hit by the slowdown in India growth as their corporate clients struggle to repay loans. The sector’s capital to risk weighted assets (CRAR) ratio fell from 14.2% as of March 2012 to 12.7% as of September.
The State Bank of India’s total capital adequacy ratio was 11.69% and its tier 1 ratio 8.73% as of September 13, down from 11.85% and 8.82% respectively at June 13. Analysts have noted bad debts piling up among smaller clients.
The Reserve Bank of India has said banks need to fully comply with Basel III capital rules, including all the deductions and risk weightings of investments, by 2018.
Local media in July quoted then CFO Diwakar Gupta as saying the bank needed about 2.3 trillion rupees in additional capital by 2018 to comply with the rules.
India’s largest bank by profits and branches is selling shares within a range of 1,565 to 1,596 rupees each, a discount of up to 2% from the price at the last close of trading.
The total size of the sale is up to 58.988 million shares worth 92.3 billion to 94.1 billion rupees, or $1.466 billion to $1.495 billion.
The issue of new stock means existing shareholders will find their stakes diluted by 7.82% unless they top up.
Citi, BofA Merrill Lynch, Deutsche Bank, JP Morgan, HSBC, SBI Capital Markets and UBS are managing the share sale.