Will Investors’ Faith In SBI Be Repaid?

Since its qualified institutional placement of equity shares in 2014, India's largest bank State Bank of India Ltd. has given its investors a return of just over 80 percent, but it still lags the gains made by the Bank Nifty in the same period.

SBI has now made three public issuances of shares over the past decade – a rights issue, and two qualified institutional placements (QIP). The latest one, a QIP, was launched on Monday, through which the bank is likely to raise up to Rs 15,000 crore at a price of Rs 287.25 per share.

The QIP, according to an investment banker aware of the transaction, has been subscribed three to four times, and Life Insurance Corporation of India is likely to be allotted as much as 25 percent of the shares on offer.

Here's a look at the performance of SBI's stock after the last two equity issuances.

The Rights Issue

In February 2008, SBI completed a rights issue to existing shareholders in the ratio of one share for every five shares held. The issue was priced at Rs 1,590 per share, and the lender raised a total of nearly Rs 16,740 crore.

The rights issue came just before the global financial crisis, which saw financial markets the world over plummet. SBI's shares fell as much as 60.65 percent till March 2009, before bouncing back as much as 290 percent by November 2010.

All told, between February 2008 and February 2014, when the previous QIP was launched, the bank's stock gave a negative return of 30.3 percent, compared with a gain of 10 percent on the Bank Nifty. Investors, who picked up shares in the rights issue at Rs 1,590 per share, saw a negative return of 3.9 percent on those shares by February 2014.

Also Read: LIC Leads The Chart For SBI's QIP

The 2014 QIP

The next share sale by the bank came in February 2014, when it raised just over Rs 8,000 crore in a QIP at Rs 1,565 per share. Market appetite at the time was muted and shares were issued at a discount of 3.95 percent on the floor price.

Between February 2014 and June this year, the bank's stock has risen just over 80 percent, while the Bank Nifty index has grown close to 128 percent.

The gain in SBI's stock is adjusted for a stock split that the bank undertook in November 2014, when it split each share into 10 shares.