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SBI sister banks’ shares zoom on merger move
CHENNAI: On a day when the equities markets in India and overseas bore the brunt of investor worries over developments in Europe, stocks of the associate banks of State Bank of India bucked the trend and surged close to lifetime highs.
Analysts said that possible business gains from the merger with SBI, which got Cabinet clearance on Wednesday, and a favourable swap ratio that could benefit shareholders, were the reasons for the stock surge.
Shares of State Bank of Mysore hit the stock’s upper circuit limit of the day, rising 20% to Rs 657.45, with more than 3.57 lakh shares getting traded. A circuit limit is an automated Sebi-fixed threshold, beyond which trading gets halted after the stock attains the maximum price level of the day, to ensure there is no manipulation or speculation.
In a similar fashion, shares of State Bank of Bikaner rose to their 52 week high of Rs 694, up 16%, while State Bank of Travancore jumped 15%, again upper circuit limit, to end at Rs 552.
The other two associate banks — State Bank of Hyderabad and State Bank of Patiala — are not listed.
The broader index Sensex ended the day 200 points, or 0.7%, down at 26,525 points.
“Dilution at the current market cap on account of merger (minority shareholding in SBBJ/SBT/SBM at 10-25%) is likely to be about 1.2%,” said Alpesh Mehta of Motilal Oswal Securities. “At the current market cap, total value for minority shareholders of associate banks stands at `2,020 crore. Merger is positive for these listed associate banks,” he added.
On the other hand, SBI’s own scrip gained just five paise to close at Rs 215.70.
On June 15, the Cabinet approved the proposal to merge the five associate banks, as well as the Bharatiya Mahila Bank, which was set up in 2013 by the previous UPA government, with SBI.
This would create a banking behemoth that would be one of the top 50 banks in the world. While the size would be huge for India, the merger is expected to bring down costs and also boost lending strength for SBI, which is currently struggling against the nimbler and technology-savvy private banks.