Sidbi Plans Rs 10,000 Cr Rights Issue Next Fiscal For Equity Expansion
Small Industries Development Bank of India (SIDBI) is planning to raise Rs 10,000 crore through a rights issue in the next fiscal year, the Chairman and Managing Director (SIDBI), Sivasubramanian Ramann, has declared to some media sources.
The objective of the rights issue is to increase its equity capital and expand its assets to Rs five lakh crore by March 2024. Currently, the bank's assets are approximately Rs four lakh crore as of March 2023, and the proposed increase will help Sidbi achieve its growth target.
Ramann has said that the Department of Financial Services has recently relocated with the aim of raising capital. As a result, the standing committee of Parliament has proposed a capital support of Rs 10,000 crore for the upcoming fiscal year to provide more lending support to SMEs.
He also added that the company's direct lending share is currently only 14 per cent. However, they anticipate this share to grow to 25 per cent in the next three years.
Currently, the refinancing portion of the company amounts to approximately 86 per cent.
According to the annual report, Sidbi's capital adequacy ratio (CAR) decreased from 24.28 per cent in FY22 to 19.29 per cent in FY23.
The report attributed the decline to the bank's effective capital utilisation to increase its portfolio. As of the June 2023 quarter, the CAR further declined to 15.63 per cent.
According to rating agency Icra, the current level of capitalisation is comfortable due to lower risk weights for the refinance book.
In the fiscal year 2022, the company's asset base was Rs 2,47,379 crore. By the end of fiscal year 2023, it had grown by 63 per cent to reach per cent Rs 4,02,383 crore. During the same period, the company's income increased by 102 per cent to Rs 18,485 crore. The net income for the year was Rs 3,344 crore, which is 71 per cent higher than the previous year's figure.
Due to tightening liquidity conditions, Sidbi's leverage rose from 9.22 to 14.36 times as of March 2022 and March 2023, respectively, driven by heightened refinancing requirements.
However, the leverage remained within the permissible regulatory limit of 18 times.
The ownership of Sidbi is split between the central government, SBI, LIC, and other public financial institutions and banks. All shareholders will participate in the rights issue.
The lender is optimistic about loan growth due to the rapidly increasing demand for direct financing. This demand has grown from 7 per cent of their book two years ago to 14 per cent.
As of March 2023, the total credit market was a little over Rs 145 lakh crore, with the SME loan book of commercial banks standing at Rs 25 lakh crore.
