‘Largest share sale through QIP': SBI plans Rs 25,000 crore Qualified Institutional Placement; appoints six banks for first share sale in 8 years
State Bank of India (SBI), the nation's most valuable public sector enterprise, is nearing the final stages of selecting several merchant banks to secure up to Rs 25,000 crore through a qualified institutional placement (QIP).
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This marks its first equity offering since 2017, as the bank, which holds 20% of India's total bank credit, seeks to strengthen its common equity tier 1 (CET-1) capital.
As of March 2025, SBI's CET-1 stood at 11%. According to industry analysts, this figure ranked amongst the lowest for public sector banks.
The board of the bank gave its approval for the QIP on May 3. Should the bank succeed in raising Rs 25,000 crore, it would establish a record for the largest QIP-based share sale in India.
QIP serves as a more expedient option compared to rights issues or follow-on public offerings, as it facilitates bulk fund collection from major institutional investors.
According to an ET report, the selected banks to oversee the capital raising include Kotak Mahindra Capital Co, ICICI Securities Ltd, HSBC Securities and Capital Markets (India) Pvt Ltd, Citigroup Global Markets India Pvt Ltd, Morgan Stanley India Co Pvt Ltd and SBI Capital Markets Ltd.
"The banks have agreed to charge just Rs 1 for this transaction, as it is a matter of league table win rather than fees. It is a prestige battle for banks to be on the mandate to raise money for the largest bank in India, which is a rare occasion," a source told the financial daily.
A similar nominal fee structure was last observed during SBI's previous QIP in June 2017, when the bank raised Rs 15,000 crore by issuing 522 million shares.
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"This is a prestigious mandate, so bidding was aggressive. One of the merchant bank's quoted a Rs 1 fee and everyone else had to come to that level," said this person cited above.
"The bank wants to augment its CET 1 ratio which is the lowest among public sector banks. Growth wise the bank is well placed with the RoE of 19% is much ahead of the 12% loan growth. But capital can now be raised to cushion the CET which is the plan," another source said, according to the report.
State Bank of India plans to approach the market in the coming months. Similar to the previous Qualified Institutional Placement where Life Insurance Corporation subscribed to half the offering, the insurer is expected to acquire a significant portion of shares this time as well. As of March 31, LIC maintains a 9.38 percent ownership in the bank, positioning it as the second-largest shareholder after the central government's 57.43 percent stake.
The bank will determine the final timing and quantum based on prevailing market conditions. SBI shares concluded at Rs 800 per share on the BSE, showing a 1% increase from Tuesday's closing price.
During this financial year, SBI will receive funds from divesting its 13.19% holding in Yes Bank to Japanese financial institution Sumitomo Mitsui Banking Corporation (SMBC). Additionally, it owns 5.19% in National Stock Exchange, which is expected to generate substantial returns upon the exchange's eventual listing.
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