CDC of the UK, IFC and Singapore’s GIC have evinced interest to acquire equity stake in IDBI Bank as the government is actively considering selling its stake in the bank to a clutch of investors. The stake sale may change the public sector nature of the bank, which is 80.16% owned by the government, and model it on the lines of a private bank with government stake falling below 50%.
Kishore Kharat, chairman and managing director, IDBI Bank, said in a press conference, “After the asset quality review, it is difficult to resist a dilution. Employees would not mind being a part of a private bank. Things have changed after the asset quality review.”
He said apart from IFC, there are others such as CDC and GIC who are also looking to pick up stake in the bank.
The bank has also identified about Rs 6,500 crore worth of non-core assets which would be sold off to bring in capital. According to Kharat, some to the family silver include the 5% stake in NSE, 19% in Sidbi, 30% in NSDL, 19.2% in Arcil and 5.5% in rating agency CARE. It also has subsidiaries like IDBI Capital, IDBI Intec, IDBI Federal, for which it is yet to undertake a valuation.
While the stake sale is under discussion with various investors undertaking the due diligence, the bank has started a steadfast action plan to double its business and also bring down its gross bad loans from over 8% to 3% and net NPA to almost zero.
Ever since the mention of the government stake sale in the bank was announced, the share price has been improving. On Tuesday, the shares of the bank were up 1.80% at Rs 59.50 on the BSE.
BK Batra, deputy managing director, IDBI Bank, said, “We are incorporating a strategic business plan where we double the business from Rs 5 lakh crore in FY 2016 to Rs 20 lakh crore in FY 2019 with a CAGR of 20% per annum. We will be rebalancing the portfolio mix with more focus on MSME and agri and retail credit, especially more focus on the priority sector. The retail advances will increase to 41.1% of total advances from 32.5% currently.”
Rating agency S&P warned that they may downgrade IDBI if they believe that the likelihood of extraordinary government support has weakened. “This could happen if the government considers privatising IDBI. The risk of privatisation will increase if the government decides to lower its stake in IDBI either based on the recommendation of Banks Board Bureau or of its own accord. We may even revise the outlook to negative if we see increased risk of privatisation,” S&P said in a note.
N S Venkatesh, executive director and CFO of IDBI Bank, said, “We have a capital requirement of Rs 20,000 crore for this growth plan from 2016-2019. QIP, FPO and tier I and tier II bonds will be issued to raise capital.”