IDBI Bank seeks bids to sell 13.71% in SIDBI, extends submission date

Among other shareholders, State Bank of India has the largest stake at 16.70 percent followed by IDBI Bank. The government owns 15.4 percent stake, Life Insurance Corporation (LIC) holds 12.2 percent share and Punjab National Bank owns 3.99 percent. The rest of the investors have less than 4 percent stake which includes public sector banks and other state-owned insurance companies.

Previously, SIDBI was a wholly-owned subsidiary of IDBI and it pared stake as it moved on to become a bank from a long-term financier.

The stake sale would be a part of its efforts to raise capital by selling its non-core assets, to help the bank tide over its huge bad loans amounting to about Rs 50,000 crore.

Mahesh Kumar Jain, managing director and chief executive officer, IDBI Bank had said in June that the bank would sell Rs 5,000 crore of non-core assets in FY18 to bolster its capital base.

The bank had formed a committee to work around the right valuations. It had already received Rs 1,861 crore capital infusion from the government for FY18 which helped pump up its capital adequacy ratio to 11.69 percent and also prevented the bank from skipping a scheduled coupon payment on its Additional Tier-1 bonds.

Meanwhile, in May, the Reserve Bank of India (RBI) had initiated a prompt corrective action (PCA) on IDBI Bank. The action was prompted by IDBI Bank's high net non-performing assets (NPAs) and negative return on assets (RoA).

In the first quarter of FY18, the bank's net NPA ratio had increased to 15.8 percent while the RoA stood at (-1) percent.

IDBI Bank also has plans to sell some of its other non-core investments, in which it plans to sell stake as part of its asset monetisation plan.

The investments include - NSE, IDBI Federal Life Insurance Company, IDBI Asset Management Ltd, IDBI Trusteeship Services Ltd, National Securities Depository Ltd (NSDL) and NSDL e-Governance Infrastructure Ltd.

"We hope to sell our remaining 3 percent stake in NSE in Q3 or by fourth quarter of this year with the NSE IPO (initial public offering)," another banker said.

On Tuesday, rating agency Moody’s downgraded IDBI Bank’s local and foreign currency bank deposit ratings to B1 from Ba2. While the bank has received Rs 1,860 crore from the government and Rs 390 crore from Life Insurance Corporation of India (LIC), it still remains under-capitalised, said the rating agency in its note.