SBBJ to go public on Nov 20

MUMBAI, November 4: State Bank of Bikaner & Jaipur (SBBJ), a subsidiary of State Bank of India (SBI), is entering the capital market on...

MUMBAI, November 4: State Bank of Bikaner & Jaipur (SBBJ), a subsidiary of State Bank of India (SBI), is entering the capital market on November 20, 1997 with a public issue of 12,21,200 equity shares of face value of Rs 100 each at a premium of Rs 440 per share aggregating Rs 65.94 crore.

The SBI’s stake in SBBJ, which is pegged at 99.21 per cent at present, will come down to 75 per cent after the public issue. Subsequently, the public shareholding will go up to 25 per cent from 0.79 per cent. The major objective of the public issue is to augment the capital base and its long term resources which would enable the bank to play a significant role in financing larger projects. The bank has achieved a capital adequacy ratio of 8.82 per cent as on March 31, 1997 as against the 8 per cent stipulated by the Reserve Bank of India.

The State Bank of India has also approved the doubling of the bank’s authorised capital from Rs 50 crore to Rs 100 crore. “We will come out with another major issue after necessary amendments are made in the SBI Susbdiary Banks Act. This will improve liquidity for scrips attracting major investors. The ceiling of 200 shares for individual shareholders will also be removed and the shares will be split into shares of Rs 10 each after the amendment,” said K R Maheshwari, managing director, SBBJ.

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Out of the issue, 1,22,100 equity shares have been reserved for allotment to employees of the bank while 152,700 equity shares have been reserved for allotment to NRIs and overseas corporate bodies. While 50 per cent of the issue is reserved for small investors who apply for less than 100 shares, there is no reservation for FIIs. “FIIs will have to purchase the shares from the secondary market,” Maheshwari said.

He said the bank has a track record of continuous profitability for 33 years and a consistent dividend payment record for the last 30 of the 34 years of existence. The bank which has about 765 branches has a low equity base. During 1996-97, the bank’s gross profit increased from Rs 114.99 crore to Rs 158.62 crore and net profit increased from Rs 26.57 crore to Rs 44.13 crore. Reserves have also increased from Rs 117.76 crore to Rs 157.08 crore. While the earnings per share has gone up from Rs 73 to Rs 121.24, the book value has gone up from Rs 421.44 to Rs 529.46.

According to Maheshwari, the bank’s total deposits have gone up from Rs 4,010 crore in 1994-95 to Rs 5,398 crore during 1996-97 while advances have increased from Rs 2,100 crore to Rs 3,012 crore. The non-performing assets have come down from 12.17 per cent in 1992-93 to 7.96 per cent in 1996-97. The bank had a record forex turnover of Rs 2,982 crore during 1996-97.

Justifying the premium of the issue, the MD said the “offer price of Rs 540 has been worked out at a price/earning multiple of 4.45 which compares favourably with the other listed banks’ PE multiples.” The minimum application size is 5 shares which would involve an investment of Rs 2,700. There will be a maximum allotment of 200 shares for individuals and employees in tune with Section 19(1) of the SBI (Subsidiary Bank) Act 1959. The shares will be listed at Jaipur (regional stock exchange), Mumbai and the National Stock Exchange.