SBI picks five banks to manage its ₹25,000 crore QIP

State Bank of India has picked Kotak Mahindra Capital Co., Citigroup Capital Markets, HSBC, Morgan Stanley and ICICI Securities to manage its ₹25,000 crore qualified institutional placement, two people aware of the development said.

“More than a dozen banks made presentations and five of them have been picked to work alongside SBI Capital Markets, the investment banking arm of the SBI group,” one of the persons cited above said on the condition of anonymity.

These banks have pitched to manage the fundraise for a fee of ₹1, the people said.

The phenomenon was common in the 2000s, when investment banks took a hit on fees to get league table mentions on large fundraises and initial public offerings.

Emailed queries to SBI, HSBC, Kotak, ICICI Securities, Morgan Stanley and Citigroup remained unanswered.

The banks were invited to make presentations for SBI’s proposed QIP this week, Mint reported first on 23 June. A qualified institutional placement is a quicker way for a listed company to raise capital by issuing shares or convertible securities to institutional buyers compared to rights issue or other equity issuance.

On 3 May, SBI’s board of directors approved a plan to raise equity capital up to ₹25,000 crore. The approval is valid for 12 months.

After being muted for the first few months, the capital markets activity has picked up pace beginning May. According to reports, around 28 bulk and block deals were executed in May, compared with just 7 in April on BSE. In the broader market, 274 bulk and block deals happened in NSE 500, compared to 128 in April, data from Trendlyne shows.

SBI's last qualified institutional placement was in FY18 when it raised ₹15,000 crore. Although reports indicated that banks were advising SBI on a ₹15,000-18,000 crore QIP in FY20, the lender did not eventually raise capital.

The bank's capital adequacy ratio stood at 14.25% as on 31 March, down 3 basis points (bps) from a year earlier but 122 bps higher than end-December. Although this was higher than the minimum regulatory requirement of 12.1%, India’s largest bank lags peers in capital buffers. Private lender HDFC Bank reported a capital adequacy ratio of 19.6%, while state-owned peer Bank of Baroda had a capital buffer of 17.19%.

India’s largest lender’s share in local deposits and loans stood at 22.6% and 19.72% as on 31 March, according to data from the Reserve Bank of India cited by SBI. The bank reported a 10% drop in profit to ₹18,643 crore for the three months through March on higher provisions.

SBI’s shares closed at ₹800 apiece, up 0.58% from the previous close on NSE, on Wednesday compared to a 0.8% rise in benchmark Nifty 50.

SBI’s market capitalization stood at ₹7.13 trillion, the highest amongst its listed public-sector peers.