Taking ahead the process of consolidating associate banks, State Bank of India (SBI) has decided to issue 34 of its shares for every 100 shares of State Bank of Indore to its minority shareholders. This is the second such consolidation within the group after State Bank of Saurashtra was merged with the country’s largest lender in August 2008.
The central board of SBI on March 26 approved a proposal to issue 1.16 lakh shares (of Rs 10 each) to minority shareholders of the Indore-based associate bank, SBI informed the Bombay Stock Exchange. The acquisition is subject to the approval of the government of India.
Last week, SBI Chairman O P Bhatt indicated that the merger could happen in the first quarter of the next financial year (2010-11).
Following the merger, SBI’s issued capital would rise to Rs 635.08 crore from Rs 634.97 crore. State Bank of Indore posted a net profit of Rs 37.84 crore for three months ended December 2009, down from Rs 70.46 crore a year ago. Its total income declined to Rs 752.05 crore from Rs 803.66 crore a year ago.
After the merger, SBI would be left with five associate banks — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. State banks of Bikaner and Jaipur, Mysore and Travancore are listed entities.
Meanwhile, SBI said its two new businesses — general insurance and custodial services — have started operations. For general insurance, it has formed a joint venture with Insurance Australia Group (IAG). The business would be written within a limited geographical area with a few commercial products. The subsidiary would commence full-scale operations later during the year, SBI said. For custodial services, it has teamed up with French financial group Societe Generale. The company expects to do business of approximately $10 billion in its first year itself.
