The bank has a lending ceiling of Rs 94,000 crore according to the new rules Setty said.
“We have been talking to Japanese banks mainly because they’ve been active in that.
But there’s no preference for anyone. Each transaction will bring a set of bankers together. It could be either relationship, either at the acquisition company or at the target company. Many a time the banks are identified based on who’s the acquirer, who’s the target,” Setty said adding that India’s largest lender will soon get a board approval to form a policy on this.
Final guidelines announced earlier this month and allow Indian banks to finance up to 75% of an acquisition’s cost in any domestic M&A with a 3:1 debt-equity ratio.
The new norms also double the total acquisition finance cap to 20% of a bank’s Tier-1 capital—give them room for banks to build a business where none existed earlier.
Setty said according to SBI’s calculation the bank has a headroom of Rs 94,000 crore for these deals though the bank will take its time getting into this space.”Initially we will go slow and small ticket size. We need to look at the transactions. Our risk appetite. The acquisition structures are very dynamic and diversified. There are major line financing, equity financing, bond program and loan. All these things are there. So initially probably we’ll not go into a complex structure. We’ll look at a plain vanilla acquisition financing where, you know, acquirer is bringing the equity and we have to give the debt,” Setty said adding that the deals will most probably be done on a comsortium basis.