SIDBI plans to float a rights issue in FY25

01 Sep 2023

The Small Industries Development Bank of India (SIDBI), a vital institution for SME finance, has revealed plans to initiate a rights issue of equity shares in the upcoming financial year. This strategic move aims to bolster its capital base by an impressive ₹10,000 crore, supporting the expansion of its growing balance sheet.

S Ramann, the Chairman and Managing Director of SIDBI, disclosed these intentions during the Global SME Finance Summit 2023. The institution's goal is to augment its asset book, targeting ₹5 trillion by March 2024, a substantial increase from the approximately ₹4 trillion recorded in March 2023.

In the pipeline for FY25, SIDBI envisions another rights issue to infuse additional capital from shareholders. A noteworthy development is that the standing committee of Parliament has recommended a capital infusion of ₹10,000 crore to further bolster lending support for Small and Medium-sized Enterprises (SMEs). As of March 31, 2022, the Government of India held a 20.85 percent stake in SIDBI. Additionally, the State Bank of India maintained a 15.65 percent stake, while the Life Insurance Corporation of India (LIC) held 13.33 percent of the shares as of March 31, 2023. The remaining ownership is distributed among other Public Sector Banks (PSBs) and institutions.

Notably, SIDBI's Capital Adequacy Ratio (CAR) stood at 19.29 percent at the conclusion of FY23, in comparison to 24.28 percent at the end of FY22. This decline in CAR was attributed to effective capital allocation, facilitating the expansion of the bank's portfolio, as outlined in its annual report for FY23.

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