Already, ICICI Bank (Rs 20,000 crore or Rs 200 billion) and State Bank of India (Rs 15,000 crore or Rs 150 billion) have announced mega FPOs, while Basel-II norms (which require banks to adjust their capital requirements according to the risk inherent in each bank's portfolio of loans and investments) will result in FPOs from other banks as well.
SBI's associate banks State Bank of Mysore, State Bank of Hyderabad and State Bank of Travancore could also hit the market during the year. Besides Syndicate Bank and UTI Bank are also expected to hit the market during the year.
According to analysts, the three SBI associates alone could garner Rs 3,000-crore (Rs 30 billion) plus. Lok Sabha recently approved amendment in required rules that allowed SBI's associate banks to raise funds through share issuances.
Also in the final stages of FPOs are Bharat Earth Movers (Rs 450 crore or Rs 4.5 billion), which has filed its offer documents with the Securities and Exchange Board of India (Sebi).
Others in the pipeline for FPOs are National Thermal Power Corporation and some other PSU banks, according to market sources. "The cost of raising capital has gone up with rising interest rates and rupee appreciation. Consequently, the foreign currency convertible bond (FCCB) route has been closed to companies and companies are looking at FPOs," said Rajeev Dalal, partner, transaction advisory services, Ernst & Young.
According to PRIME Database, 2005 saw 19 FPOs raising Rs 12,764 crore (Rs 127.64 billion) or 56 per cent of the total mobilisation (Rs 22,754 crore or Rs 227.54 billion). Of the 19 FPOs in 2006 that raised a meagre Rs 4,817 crore (Rs 48.17 billion) or 20 per cent of the total mobilisation (Rs 24,141 crore or Rs 241.41 billion), four were banks; Bank of Baroda, Andhra Bank, Union Bank of India and the South Indian Bank Ltd.
"Companies derive a lesser price through an FPO compared with a rights issue or a qualified institutional placement (QIP). Since the banking sector has grown tremendously in the last 10 years, a series of banks are going for an FPO. They want to tap shareholders beyond the existing ones," said Prithvi Haldea of PRIME Database.
He, however, adds a note of caution, which could come in the way for the final figure for the year, considering that FPOs take time for Sebi approval.
Despite this, except for Andhra Bank, trading at Rs 85, down 5.5 per cent from its offer price of Rs 90, the others are trading at a premium, reflecting strong investor demand for bank stocks.
A mature company will take lesser time to establish itself in the market than a new, unlisted entity since it will have previous knowledge and experience of Sebi procedures and the market, added Dalal.
