State Bank of Mysore to tap equities market to raise Rs 500 crore

MUMBAI: State Bank of Mysore (SBM), which posted a 27% rise in net profit for the quarter ending March 2015, plans to tap the equities market later this year. Country’s largest bank State Bank of India will reduce its stake by 15% in the associate bank to enable them to raise capital.

Speaking to media, SBM’s managing director, Sharad Sharma said, “We would be raising around Rs 500 crore from the equities market. It could be a follow-on issue or we could raise money from qualified institutional investors.” The shares of SBM closed at Rs 529, up 11% over previous close at the Bombay Stock Exchange.

The bank has posted a net profit of Rs 136 crore in fourth quarter and declared a 60% dividend for full year. The bank attributed the rise in profit to 43% jump on non- interest income to Rs 260 crore. Non-interest income includes Rs 38 crore profit from sale of investments and Rs 23 crore profit from recovery of written off account. Net interest income rose 7% to Rs 553 crore. Net interest margin- the spread between cost of funds and yield on investment – stood at 2.98%.

As of now SBI hold 90% stake in the associate bank which will be reduced to 75% post follow-on issue. The Companies Act requires public holding of at least 25% in listed companies by the end of fiscal year 2017.

“The bank has adequate capital to meet its credit growth targets. But the move to raise capital from equities market is to adhere to the Companies Act,” said Sharma. The bank has projected credit growth of 12-13% for fiscal year 2015-16 as against an average growth of 9% reported in 2014-15. For the full year, the bank reported a 49% net profit to Rs 408 crore.

The gross non-performing assets stood at Rs 2136 crore or 4% of the total advances. During the fourth quarter, the bank saw fresh slippages – loans that moved from standard category to substandard category- of Rs 246 crore. Bank’s capital adequacy ratio stood at 11.42% which include tier I – core capital- of 8.36%.