Government asks PSU banks to list subsidiaries via IPOs
What's the story
The Indian government has directed public sector banks to expedite their plans for listing subsidiaries and joint ventures. The directive identifies around 15 entities that are being prepared for initial public offerings (IPOs) or strategic divestments in the medium to long term. These steps are part of a larger strategy by the finance ministry to unlock value, improve governance, and enhance returns on state-owned capital by tapping into public markets at the right time.
Operational expansion
Banks advised to inject more capital into their subsidiaries
The government has also advised banks to inject more capital into their subsidiaries and joint ventures, if needed. This is to support operational expansion ahead of any potential market listing. The aim is to build sufficient scale in these businesses for maximum returns from future monetization. The finance ministry has also asked banks to strengthen governance frameworks and improve overall operational efficiency within their subsidiaries as part of these preparatory steps.
Future plans
SBI, Canara Bank exploring listing of their subsidiaries
The State Bank of India (SBI), the country's largest lender, is likely to consider listing its two major subsidiaries—SBI General Insurance and SBI Payment Services—after further scaling up their businesses. Meanwhile, Canara Bank has already begun the process of listing its asset management joint venture, Canara Robeco AMC. The lender also plans to take its life insurance joint venture public.
Market response
Shares of public sector banks reacted positively
The shares of public sector banks reacted positively to the finance ministry's directive, with several lenders posting intraday gains on Monday. Central Bank of India led the rally with a 2.4% increase, followed by Canara Bank, Bank of Baroda, Bank of India, and Union Bank of India, which gained 2.3% each. Indian Bank rose 1.9%, while Indian Overseas Bank added 1.2%. Shares of SBI saw a more moderate increase at 1%.