State Bank of India to Raise Up to Rs 25,000 Crore via Qualified Institutional Placement

Strategic Insights -

The State Bank of India (SBI) is set to embark on its first share sale in eight years, a Rs 25,000 crore qualified institutional placement (QIP), to augment its common equity tier 1 (CET-1) capital. With a CET-1 ratio of 11% at the end of March 2025, the lowest among government lenders, the bank aims to boost its capital base. Six merchant banks, including Kotak Mahindra Capital Co and ICICI Securities Ltd, have been finalised to manage the fundraising, with the agreement to charge a fee of just Rs 1, a rare occurrence in the Indian banking sector.

Key Takeaways:

  • SBI's CET-1 ratio is 11% at the end of March 2025, the lowest among government lenders.
  • The bank aims to raise up to Rs 25,000 crore via QIP, its first share sale in eight years.
  • Six merchant banks have been finalised to manage the fundraising, including Kotak Mahindra Capital Co and ICICI Securities Ltd.
  • The bank has agreed to charge a fee of just Rs 1 for the QIP, a rare occurrence in the Indian banking sector.
  • The QIP will be the largest share sale through a QIP in India, and the bank expects to hit the market in the next couple of months.
  • The Life Insurance Corporation (LIC) is likely to bid for a substantial portion of the equity, given its 9.38% stake in the bank as of March 31.
  • SBI shares ended at Rs 800 a piece on BSE, up 1% from Tuesday's close.

Statistics:

  • CET-1 ratio of SBI: 11% at the end of March 2025.
  • Amount proposed to be raised via QIP: up to Rs 25,000 crore.
  • Fee agreed by merchant banks: Rs 1.
  • Total number of merchant banks finalised: 6.
  • Stake held by LIC in SBI: 9.38% as of March 31.
  • SBI's Return on Equity (RoE): 19%.
  • SBI's loan growth: 12%.
  • SBI's board approval for QIP: May 3.

Sources:

  • PressTrust of India
  • SBI share sales in 2017
  • QIP and CET-1 capital
  • SBI CET-1 ratio
  • Six merchant banks finalised
  • Kotak Mahindra Capital Co
  • ICICI Securities Ltd
  • HSBC Securities and Capital Markets (India) Pvt Ltd
  • Citigroup Global Markets India Pvt Ltd
  • Morgan Stanley India Co Pvt Ltd
  • SBI Capital Markets Ltd