Citigroup, HSBC, Morgan Stanley, Kotak Investment Banking and ICICI Securities are said to be the lead contenders to roll out the upcoming fund raise of India's largest bank, State Bank of India.
Sources close to the development say the bidding process to shortlist investment bankers for SBI's qualified institutional placement (QIP), which is likely to be rolled out in the coming months saw massive participation, particularly from foreign players. "The number of global I-bankers who bid for the QIP far outnumbered the domestic players," said an investment banker who didn't want to be named.
Citigroup, HSBC and Morgan Stanley are said to have emerged as the preferred bankers to run the process. Among domestic bankers, it is understood that Kotak Investment Banking and ICICI Securities may have made it to the final list of bankers to manage the issue.
SBI's in-house investment banking arm, SBI Capital Markets, which usually plays a dominant and leading role in any of SBI and it's affiliates capital raising programs, is likely the lead banker for the upcoming QIP as well. The bank plans to launch the issue in August or September.
"The mandate to investment bankers is to attract as much foreign investors at attractive valuations," said another banker.
To be sure, SBI trades at 1.7x 12-months trailing price to book value and commands premium valuation among other state-owned banks.
Interestingly, the short listed I-bankers pitched for the mandate for a fee of Re 1. "Transaction fee will be based entirely on the success of the issue and the number of investors who have been brought in through the issue," said a banker, though he refrained from revealing the percentage of transaction fee per investor participating in the issue. "It was a cut-throat bidding process," said another banker, adding that most bidders showed interest in the process despite competitive pricing only to ensure that they are part of the process. "The objective was to be a part of the league table in the QIP," said another banker explaining the rationale why a few firms bid at Re 1 for SBI's equity raise.
Sized at Rs 25,000 crore, the upcoming issue is set to be SBI's largest fund raise plan till date, larger than June 2017's QIP which helped the bank raise Rs 15,000 crore of Tier-1 equity capital but witnessed a demand of about Rs 27,000 crore. "This time too, there is a lot of interest in SBI share," said a banker cited above.
Emails sent to SBI, and the other investment bankers named in the article did not receive a response at the time of publication. Citigroup declined to comment on the matter.
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