The pricing will be determined as per the SEBI formula for the preferential allotment, said P Sitaram, ED, IDBI Bank.
IDBI Bank at its meeting held on March 21, 2017 has approved the proposal for preferential issue of capital to Government of India and other financial institutions if any. The aggregate would amount to about Rs 2500 crore.
P Sitaram, ED, IDBI Bank in an interview to CNBC-TV18 clarified that the preferential issue of Rs 2500 crore is in two parts – Rs 1900 crore to be infused by the government and Rs 600 crore by financial institutions. However, Rs 600 crore is optional and depends on demand. If the bank does not identify institutional investors for Rs 600 crore then they would go with Rs 1900 crore allotment.
The government infusion of Rs 1900 crore likely by March 31.
Below is the transcript of P Sitaram's interview to Reema Tendulkar and Prashant Nair on CNBC-TV18.
Reema: Can you give us some details about this preferential issue, what will be this stake of government of India, once you allot them? Is there any division how much goes to financial investors, how much to the government and what will it do to your capital?
A: The government has indicated that they have allocated an amount of Rs 1,900 crore for IDBI Bank. Over and above that, we have taken an approval for another Rs 600 crore. Together, this makes Rs 2,500 crore, so we are planning the entire placement through a preferential allotment. The Rs 600 crore top-up is an optional thing that is if we are able to identify institutional investors to that extent, part or whole of that Rs 600 crore. Then we would be doing that, otherwise, we will be going ahead with the Rs 1,900 crore indicated by the government.
Prashant: What would the dilution be? Have you decided the pricing, etc?
A: The pricing will be determined as per the SEBI formula for the preferential allotment. So, reference date is yet to come, therefore it will be decided on that day.
Prashant: By when are you looking to this?
A: We would look forward to the infusion by March 31.
Prashant: With the money coming in, how would your capital ratios look like? How will they change?
A: Rs 1,900 crore will have about 60 basis points in fact, on our capital adequacy.
Prashant: So, this is it for now, right? This strategic stake sale, etc. anything there or this is it for now?
A: This resolution pertains to the preferential issue and as I told you, these are the two parts mind.
Prashant: The reason I asked you that is because there is this and there is also the CEO swap. You will have a new CEO coming in soon. It does show the resolve of the government to actually at least focus on IDBI Bank in a way, would you agree with that assessment?A: I do not have any comments on that.