Saturday, June 20, 2009

SBI in talks with Gulf investors for PE play

State Bank of India is talking to the governments of Qatar and sovereign entities in Oman to set up a private equity

“The government has designated SBI as the operationalising agency for setting up a sovereign wealth fund for the Qatar government,” said OP Bhatt, chairman, State Bank of India, at the bank’s 54th annual general meeting on Friday. “SBI is also in an advanced stage of setting up a general purpose private equity fund jointly with sovereign entities in Oman. Some other funds with Middle-East countries are also at various stages of being set up.”

Indeed, there have been very few instances of SWFs forming joint ventures with other funds. However, in recent times, funds belonging to the governments of China, Singapore and Dubai have invested in other private equity funds. Such funds came under the spotlight because of concerns of ownership of some assets. Also, these funds are also reported to have lost around $50 billion in the current financial turmoil.

SBI has already entered the private equity business. The Macquarie-SBI Infrastructure Fund, set up jointly with Macquarie, has raised over $1billion. It is expected to raise additional funds of $1 billion-$2 billion in the current year. As of today, SBI has a tie-up with Macquarie Capital group of Australia and IFC Washington for a $3-billion private equity fund to finance infrastructure projects.

Speaking at the AGM, Mr Bhatt also informed shareholders that the bank’s joint venture with Societe Generale Securities Services for custodial services business will start operations from the second quarter of this fiscal. The joint venture, Insurance Australia Group, for general insurance will start operations in the fourth-quarter of the current fiscal, he added.

With regards to other plans, Mr Bhatt said: “We aim to make SBI an international brand name, and foray into retail in Singapore by opening three new branches and seven ATMs.” SBI has 92 overseas offices in 32 countries and 11,448 domestic branches.

He further said SBI is planning new initiatives in mobile banking. The bank is also looking at consolidation of payment solutions business to achieve efficiency in operations, reduce costs and avoid duplication.

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