India’s largest lender State Bank of India is mulling to sell stakes in its insurance and asset management units to meet capital requirements and shore up its balance sheet, the Bloomberg reported citing the company’s chairperson Arundhati Bhattacharya.
The lender is planning to list its insurance units and is holding discussions with its joint venture partners for the same. SBI owns 74 per cent stake in SBI Life Insurance Co Ltd, with BNP Paribas Cardif SA holding the remaining. On the other hand, it also owns majority stake in SBI General Insurance Co. Ltd with Insurance Australia Group Ltd holding the rest.
Bhattacharya did not share more details on the proposed public float—whether it is being contemplated for both the insurance arms and if it will also offer some shares for sale or restrict it to fresh issue.
The government has ratified a long pending proposal to hike FDI in insurance sector from 26 per cent to 49 per cent. This will allow insurance firms to not just attract more money from foreign JV partners but also to attract foreign portfolio investors.
Meanwhile, the PSU bank, which accounts for about a quarter of the country’s loans and deposits, is also in talks with Paris-based Amundi Asset Management, which holds a stake in SBI Funds Management Pvt Ltd, for a potential share sale, Bhattacharya told the news agency.
The bank needs to garner billions in additional equity capital by 2019 to meet Basel III regulatory guidelines. As on March 31, 2014, the bank had a capital adequacy ratio of 12.96 per cent as compared with 12.92 per cent in the year ago period.
Earlier in January this year, it raised Rs 10,000 crore by offloading stake to the government and institutional investors to bolster its capital adequacy ratio.
During the March quarter, the lender posted a decline of 8 per cent in its standalone net profit to Rs 3,041 crore from the year-ago period.
Shares of the company were trading at Rs 2493.00 per share at 2:15 PM (IST), down 0.33 per cent from their previous close on the BSE in weak Mumbai market on Monday.
(Edited by Joby Puthuparampil Johnson)