SBI associates may cut share face value to Rs 10

Move seen as prelude to public offers by associates.

The State Bank of India (SBI) has moved the finance ministry's banking division to reduce the face value of the equity shares of SBI's associate banks from Rs 100 to Rs 10 or less. This can be done if the finance ministry agrees to amend the SBI Subsidiary Act.

The proposal to bring down the face value to Rs 10 is seen by the market as a prelude to SBI's associates hitting the capital markets either in India or overseas with a public offer.

A senior State Bank executive admitted that the bank had indeed moved the ministry with the proposal but refused to comment on the plan to tap the capital market.

"As of now, all the associate banks are adequately capitalised," the executive said. But finance ministry sources said the move to bring down the face value of shares was in line with the government's strategy to encourage state-owned companies and banks to tap the capital market.

The four unlisted SBI associates are State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala and State Bank of Saurashtra. The other three are listed. 
 

Big brother's stake SBI shareholding in associate banks
State Bank of Hyderabad	100.00
State Bank of Indore	98.05
State Bank of Patiala	100.00
State Bank of Saurashtra	100.00
State Bank of Bikaner & Jaipur*	75.00
State Bank of Mysore*	92.33
State Bank of Travancore*	75.00
* listed banks                                           (figures in %)

They are State Bank of Travancore, State Bank of Mysore and State Bank of Bikaner & Jaipur. SBI's stake in these three banks is between 75 and 92.33 per cent.

On account of the high face value of the shares and the low floating stock in the market, trading volumes for these stocks are low. State Bank of Bikaner & Jaipur scrip is quoting at Rs 1,875.60, State Bank of Mysore at Rs 1,566.60 and State Bank of Travancore at Rs 1,798.20.

Bringing down the face value will call for an amendment to the Act. The government is expected to give its nod this fiscal.

The SBI stock earlier had a face value of Rs 100 and the SBI Act had to be amended to bring down the face value to Rs 10 to pave the path for its IPO. Its public issue carried a premium of Rs 90. Now, the stock is trading at around Rs 470.

State Bank of Hyderabad posted a net profit of Rs 381.20 crore in 2003-04, State Bank of Indore Rs 226.26 crore; State Bank of Patiala Rs 430.36 crore and State Bank of Saurashtra Rs 177.39 crore.