SBI has 5-6 M&A financing deals in pipeline: Official

New Delhi: Country's largest lender State Bank of India has five to six merger and acquisition (M&A) financing deals in the pipeline, a senior bank official said on Tuesday.

"We have currently 5-6 merger and acquisition deals in the pipeline, but are not targeting any market share," the official told PTI.

The bank has so far executed three deals under the RBI's newly introduced acquisition financing framework.

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The facility is helpful for the banking sector as it is able to attract clientele from sectors like the software industry which does not typically need bank finance in normal course, the official said.

On February 13, the Reserve Bank of India (RBI) came out with the final guidelines on acquisition finance by banks, increasing the lending limit to up to 75 percent of the deal value from the 70 percent proposed in the draft rules.

In amended directions governing commercial banks' credit facilities, the central bank also stated that lenders will be allowed to fund promoters' stake while they set up new companies.

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"Total bank financing shall not exceed 75 percent of the acquisition value, as independently assessed by the bank," the central bank had said.

In late October, the RBI first came out with a draft, allowing banks to fund acquisitions, an activity prohibited till recently.

During the post earnings conference, State Bank of India's Chairman CS Setty said that many of the deals we have already undertaken, including the one that was discussed, are still in progress. "Most M&A deals also take time, so it is difficult to determine what will actually materialise in a particular period."

Typically, it starts with a bridge loan, which is then followed by a longer-term loan. In some cases, the entire amount is not drawn, as clients may also tap other sources of funding. So, it is difficult to make a precise prediction much in advance, he added.

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