SBI likely to receive `3,000-`4,500cr capital infusion in lieu of shelving of right issue in FY2012 ::Angel Broking,

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SBI likely to receive `3,000-`4,500cr capital infusion in lieu of shelving of
right issue in FY2012
In a bid to achieve the prescribed 8% tier-I capital adequacy norm, Government of India is
likely to infuse `3,000-`4,500cr in SBI by December 2011 or maximum by March 2012. In
our view, this amount will be sufficient for achieving 8% tier-I CAR. However, according to
the Financial Services Secretary, after receiving the capital infusion, the bank is unlikely to
go on with its proposed rights issue in FY2012. Of the c.`12,000cr needed by SBI in order
to achieve the 8% tier-I CAR, `7,500-`9,000cr is likely to be funded via internal accruals
and the balance amount is likely to be infused by the government.
While this infusion is expected to shore up the tier 1 CAR of the bank to c.8%, it would be
still short of the benchmark 9% that most large banks currently have. While the capital
adequacy ratio is expected to be an overhang on the stock in the short term, however, in
the medium term considering the attractive valuations (1.0x FY2013 ABV after adjusting for
value of subsidiaries) and structural positives, we maintain a buy on the bank with a target
price of `2,403.