Page 215 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 15. The certificate to commence business entitles the company to commence business given in
the main ……………..clause of the memorandum.

Case Study Holding Co-formation: SBI ‘Putting Everything in
Place’

BI on its way to form a holding company for its insurance and asset management
ventures, will ensure that all legal issues, some of which had cropped up recently
Swhen the ICICI group initiated a similar plan, are adequately addressed.
SBI, which may allow a few strategic investors to take minor stakes in the company, is
looking at a smooth formation, Mr O.P. Bhatt, Chairman, said.

The bank’s plan assumes significance in the context of the recent move by its peer, which
had faced certain critical issues, at least temporarily.
SBI, which will in due course consider the possibility of listing the holding outfit too,
intends to go ahead with its formation fairly early. The company will enable the bank to
bring about greater synergy in its operations, it is felt.
Insurance, MF business

The holding company is aimed at SBI’s insurance and mutual funds businesses. The insurance
company, a joint venture with Cardiff, is known to be making quick strides in a rapidly
evolving market.

The funds business, a joint venture with Societe Generale, has recently crossed a crucial
landmark on the AUM (assets under management) front. Both Cardiff and SG are large
players internationally.
Credit, Deposit Growth
The bank on another front is targeting a credit growth of about 25 per cent and a deposit
growth of about 20 per cent. It is also aiming to shore up its capital base adequately. As
things stand, the Government’s share in SBI’s equity will not come down below 55 per
cent. It is now roughly 59 per cent.
Incidentally, interest rates, the Chairman told newspersons while replying to a question,
have more or less peaked.
SBI, one of the select players permitted by the pension regulator to provide pension fund
management, is lining up a separate company for the purpose.

It intends to pursue the pension venture on its own and not tie up with any other entity,
foreign or otherwise.
Holding Co’s Valuation
The proposed holding company’s valuation currently stands at about $7 billion, Mr Bhatt
maintained, adding that the figure is based chiefly on the kind of business recorded by the
State Bank group’s insurance company.

The valuation is ‘live’ — it is expected to change frequently with time — and is based on
calculations worked out by the bank internally. The strategic investors that may be allowed
to come in by the bank will hold 5-10 per cent in the proposed company.
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