MUMBAI: State Bank of India (SBI) is looking to raise a whopping Rs 25,000 crore through a qualified institutional placement (QIP) of shares and has roped in six investment bankers for the biggest QIP deal in India Inc and the first share sale in eight years.
The bank is looking at hitting the market within the next two months to shore up its core capital as the nation’s largest lender expects accelerated loan demand on the back of the falling interest rate regime.
The fundraise is aimed at boosting its common equity tier 1 capital, which in the March 2025 quarter was only 11%, the lowest among public sector lenders.
The bank, which controls a fifth of the system-wide credit, has roped in Citigroup, HSBC, ICICI Securities, Kotak Capital, Morgan Stanley and SBI Caps as the lead bankers for the share sale, a source told TNIE Friday.
These banks have agreed for just Re 1 as their commission/fee. The i-bankers had also charged just Re 1 from the bank in the last fundraise too, eight years ago when it had mopped up Rs 15,000 crore selling 522 million shares in June 2017, the source added.
The i-bankers had also charged a similar amount for the Rs 21,008-crore IPO by LIC in May 2022 which till dates stands as the largest primary issue in the country.
Its common among i-bankers to do the deal pro bono for marquee issues, as being part of such big deals is more important than earning a fee.
The SBI board had on May 3 approved fundraising and if it goes ahead with the plan in full, it will be the largest ever QIP among corporate India. Corporations prefer QIP issues as it is much faster than other modes of fundraising, like rights issues or follow-on offers, as the money comes from bulk share purchases by large institutional investors.
Half of the SBI’s 2017 share sale worth Rs 15,000 crore through the QIP route was snapped up by LIC, which now owns 9.4% of the bank, making it the largest shareholder after the government that owns 57.43%.
After the May board meeting, the bank had said the board had approved the QIP proposal to raise up to USD 3 billion as long-term fund in single or multiple tranches during FY26 through a public offer, or a private placement of senior unsecured notes in dollar or any other major foreign currency.
Chairman CS Setty had said during the fourth quarter earnings call that without raising core capital, the bank's growth will not be impacted. Benign asset quality is likely to continue for more period."
The lender had raised Rs 7,500 last September through 15-year tier II bonds, with a call option at the end of 10th year. In the previous financial year, the bank had raised Rs 15,000 crore through tier II bonds.
The SBI counter closed 1.05% to Rs 805.40 on the BSE, gaining for the fourth day and boosting BankNifty to a new lifetime high of 57440, up 237 points and the Sensex at over 84,059 and Nifty over 25638.