SBI goes aggressive on stocks

India's largest bank has invested Rs 4,973 crore in shares till December

State Bank of India (SBI), the country's largest bank, is aggressively scaling up its equity investments, for the first time since banks were allowed to invest in company shares over a decade ago.

Till March 2007, the bank had invested a total of Rs 1,973 crore in shares of companies. In the nine months since then, it has added Rs 3,000 crore to its investment kitty, making investments of over Rs 100 crore in a clutch of blue-chip companies including GMR Infrastructure, Godrej Industries, Maruti Suzuki, Cairn India and DLF, besides closest rival ICICI Bank. Last year, the bank's equity book had expanded by Rs 455.46 crore.

"We have never looked at equity the way we are doing in the last one year or so. We are building (our investment portfolio) gradually and we intend to (continue to) do it," said a senior SBI official.

While the benchmark Sensex has risen 54.64 per cent to 19,261.35 points from 12,455.37 points since April, SBI's equity book has gone up 153 per cent to Rs 5,000 crore in the same period.

Last month, SBI came to the aid of corporate giant Godrej Industries, subscribing half of its fresh issue of 2.79 crore equity shares. At Rs 215 per share, SBI invested Rs 300 crore in the company. The company expanded its shares to 31.9 crore shares, with SBI holding at 4.36 per cent.

Earlier this month, SBI invested around Rs 500 crore in GMR Infrastructure, a flagship company of the GMR Group which is a partner in modernising and upgrading the Delhi international airport.

The company had issued 16.52 crore equity shares to institutional investors to raise Rs 3,965.71 crore, taking the total shares issued to 49.63 crore shares. At Rs 240 per share, SBI was allotted 2.08 crore shares, picking up a 4.19 per cent stake in the company.

"There has been a shift in the financing of companies to a combination of debt and equity. If the bank has to have a relationship with the corporate, then it has to be in the debt and equity segment together. We are taking part in nearly all issues unless we feel the valuation is too high," said the official.

In the offloading of the government's stake in the erstwhile Maruti Udyog, now Maruti Suzuki India, SBI bought a 2.53 per cent stake in the company, which it has now pared down to 1.77 per cent. At Rs 775 per share, SBI had invested around Rs 395 crore earlier this year.

The bank also supported its private sector rival ICICI Bank's follow-on public issue, investing around Rs 300 crore at Rs 940 per share. SBI also invested over Rs 100 crore in the shares of real estate major DLF and oil exploration and production company Cairn India.

"We independently study each company comprehensively. Before making an investment we look at the upside. If the stock is making money, then in six months or one year we can book profit. For example, for Cairn India, the oil has yet to be pumped out. At Rs 210/220 per share, we think the stock has not reached its upper potential," said the official.

Curbs on overseas borrowings and high domestic interest rates have increasingly made a booming stock market a more attractive option for companies to fund their expansion plans than raising debt.

SBI is already seeing its investments appreciate by a huge margin. The price of ICICI Bank's shares has risen 24.6 per cent to Rs 1,167 and that of Maruti Suzuki 30.36 per cent to Rs 1,010.

The bank has already made a 24.6 per cent and 30.36 per cent notional gain on its investments in ICICI Bank and Maruti Suzuki India, respectively, with their shares moving up to Rs 1167 and Rs 1010 on the BSE.

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FUTURE INVESTMENTS

Since March 2007, SBI has added Rs 3,000 crore to its investment kitty, making investments of over Rs 100 crore in a clutch of blue-chip companies including GMR Infrastructure, Godrej Industries, Maruti Suzuki, Cairn India, DLF and ICICI Bank

While the benchmark Sensex has risen 54.64 per cent to 19,261.35 points since April, SBI's equity book has gone up 153 per cent to Rs 5,000 crore in the same period

The bank also supported its private sector rival ICICI Bank's follow-on public issue, investing around Rs 300 crore at Rs 940 per share