The Hindu Business Line : SBI prices rights issue at a discount of 35% at Rs 1,590

Capital offer
Government will also subscribe to the issue.
Employees Stock Purchase Scheme planned.
Discount price for employees yet to be decided.

Our Bureau

Mumbai, Jan. 14 State Bank of India, the country’s largest bank, has offered a new year’s gift to its shareholders by pricing the rights issue at Rs 1,590 per share. This is at a discount of about 35 per cent to the current market price of SBI.

On Monday, shares of SBI closed at Rs 2,462.25 on the BSE, against the previous close of Rs 2,437.25.

The SBI board on Monday approved issue of about 10.5 crore shares on a rights basis to raise Rs 16,736.31 crore. In terms of size, this is perhaps second to ICICI Bank’s follow-on public issue of Rs 20,000 crore – Rs 10,000 crore raised domestically and Rs 10,000 crore through an ADR issue.

The ratio for the SBI rights issue is one share for every five shares held as on the record date on February 4, 2008.

issued capital

The issued capital of SBI would increase to Rs 650 crore from the current Rs 526.3 crore after the rights issue. As the ratio of the rights issue is 1:5, the issued capital would see an increase of roughly 20 per cent.

As the price of the rights issue is lower than expected, it will attract lot of retail interest, a banking analyst said.

As the Government of India, which holds 59.73 per cent, will also subscribe to the issue to the tune of about Rs 10,000 crore, there will be no dilution of stock, he said.

A senior official from the bank said that SBI wanted to make the price attractive to its shareholders. “The average price was about Rs 1,600 in the last one year, Rs 1,800 in the following months and Rs 2,100 in the last three months. If there were any spikes in the last few days, we have not taken them into account. Also, after 1994, we have not issued any bonus shares. Our shareholders are entitled to something like this from an institution like SBI,” he said.

The SBI Board also approved the proposal to issue shares to employees of the bank under Employees Stock Purchase Scheme. This means that out of the 10.5 crore-odd shares that would be issued, about 80-85 lakh would be reserved for existing employees who are SBI shareholders.

Unlike an Employee Stock Option Scheme, where employees have the option to pick up shares as per their needs, spread over a longer period, in this case, it is an outright offer that has to be paid for right now.

There could also be a discount to the price for the employees, which has yet to be decided, the official said.

“The Government has given an in-principle approval for the proposal,” the official said.