State Bank of India Mulls Share Sales in Insurance, Asset-Management Units

By and | July 28, 2014

State Bank of India, the country’s largest lender, is considering share sales in its insurance and asset-management units to meet tighter capital requirements.

“We are in talks with our joint-venture partners regarding the listing of the insurance units,” Chairman Arundhati Bhattacharya said in an interview at her office in Mumbai on July 25. The lender is also in discussions with Paris-based Amundi Asset Management, which holds a stake in SBI Funds Management Pvt., for a potential equity issue, she said without elaborating as a final decision has yet to be made.

With the plan, SBI is set to join companies including KKR & Co.-backed Cafe Coffee Day and Lodha Developers Pvt. that are looking to tap stock markets for funds after India’s benchmark share indexes surged to records this month. The bank needs to raise more than 800 billion rupees ($13.3 billion) of additional equity capital by 2019 to comply with international standards laid out by the so-called Basel III regulatory regime.

SBI raised 100 billion rupees [$1.665 billion] in January by selling shares to the government and institutional investors to bolster its capital adequacy ratio, in accordance with Basel III guidelines, to 12.44 percent as of March 31.

Government-controlled State Bank owns 74 percent of the capital in SBI Life Insurance Co., with BNP Paribas Cardif holding the remainder. The lender has a stake in SBI Funds Management with Amundi Asset, and SBI General Insurance Co., a joint venture with Insurance Australia Group Ltd.

Best Performer
Shares of SBI gained 42 percent this year, after slumping 26 percent in 2013. The S&P BSE Bankex, a gauge of 12 lenders, climbed 35 percent in 2014.

International investors have poured more than $12 billion into Indian stocks this year amid expectations a new government under Prime Minister Narendra Modi will spur growth in Asia’s third-largest economy. The S&P BSE Sensex Index has jumped 23 percent in 2014, making it the best performer among benchmark gauges in the 10 biggest stock markets.

Initial public offerings in India have raised 1.39 billion rupees [$231 million] this year after falling to a decade low in 2013, data compiled by Bloomberg show.

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