No more small buyouts, says SBI chief
State Bank of India, which just completed the deal for buying 76 per cent stake in a small bank in Indonesia for $5 million, will not go in for any more such tiny buyouts, the SBI Chairman, Mr O.P. Bhatt, said.
The deal for acquiring the foreign bank was signed in November 2005 when Mr A.K. Purwar was the SBI Chairman.
Indonesian deal
"It was not possible technically and legally for us to withdraw from the Indonesian deal," Mr Bhatt told Business Line. "But we have put on hold acquisition of another small bank in Africa," he said.
SBI will have to spend another $12 million now to get the forex licence for the Indonesian bank, PT Bank IndoMonex, the acquisition of which was completed only last week, more than a year after signing the MoU.
Not business sense
Mr Bhatt said buying small banks doesn’t make business sense for SBI.
"We will go for overseas acquisition only if it is a sizable bank. Acquiring banks worth $3 million or $5 million doesn’t make business sense. The cost is enormous and we don’t get (adequate) returns. But if the bank is worth $300 million instead of $3million, we may look at it," Mr Bhatt said.
Purwar regime
Last year, during Mr Purwar’s tenure as chairman, SBI had acquired Indian Ocean International Bank in Mauritius for $8 million, 76 per cent stake in Giro Commercial Bank in Kenya for $7 million and 75 per cent majority stake in the Indonesian Bank PT Bank IndoMOnex for $5 million.
SBI had also reportedly looked at a bank in Bangaldesh and another in Africa.
Mr Purwar had indicated more such buyouts in Asia and Africa to expand SBI’s global reach. But Mr Bhatt, who took over as chairman six months ago, has an entirely different view.
"It doesn’t make any sense for a bank like SBI to buy a small bank abroad just to have its presence in that country. If we get a good offer and the country in which the bank has a good business fit with our country’s trade, then it makes sense to look at it. In any case, we are not actively looking (overseas acquisition)."
Plans review
The bank is also planning a re-look at its own overseas operations. " I will not grow market share at the cost of profitability. It does not make sense to have a few branches overseas. I would prefer consolidating their operations rather than acquiring few more branches," he said.
Currently SBI has 52 offices and branches in 32 countries.
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