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SBI – Augmentation of tier-II capital through public issue of bonds
SBI’s board on Thursday approved raising of capital for an aggregate amount of
`10,000cr by way of public issue of subordinated bonds (lower tier-II bonds) during the
remaining period of FY2011 and in FY2012 in different tranches, and for raising of
`1,000cr with a green shoe option to retain `1,000cr, along with an option to retain any
amount of oversubscription under the retail category beyond `2,000cr but up to the rated
amount of `10,000cr in the first tranche.
The bank had come out with a retail bonds issue in 2QFY2011 as well, which had
received good response from investors. The bank is also planning to come out with a
rights issue of equity shares of `15,000cr–20,000cr in 4QFY2011. As of 2QFY2011, the
bank had a CAR of 13.2%, with tier-I CAR of 9.6%. These steps would help to ensure that
the bank has sufficient capital to grow at a steady pace over the next 2–3 years. We
maintain a Buy rating on the stock with a Target Price of `3,504.
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