IDBI to raise Rs 2800cr but it's not going Axis's way, yet

The board of IDBI Bank Wednesday passed an enabling resolution to allow it to raise Rs 2800 crore via a qualified institutional placement (QIP) or any other instrument like follow-on public offer.But this does not follow from recent talks that the government was looking to sell direct stake in the firm, and would hold it indirectly via other public companies, as it does in Axis Bank, a move that has allowed the latter to operate like a private sector bank.In an interview with CNBC-TV18's Latha Venkatesh, IDBI Deputy MD BK Batra said he had not heard from government on any planned reduction of its stake.Recently, Finance Minister Arun Jaitley had said the government was evaluating options through which a bank such as IDBI could be quasi-private, like how Axis evolved from UTI."It was the bank’s annual plan to raise capital was Rs 5000 crore, out of which Rs 2200 crore is being infused by government in the next few days," he said, adding that the remaining will be raised from the market.The government’s stake in the company currently stands at 76.5 percent, which would go up to 80 percent post Rs 2200 crore infusion and then again come down to around 74-75 percent after Rs 2800 crore is raised, Batra said.Below is the verbatim transcript of BK Batra’s interview with Latha Venkatesh on CNBC-TV18.Q: We understand Rs 2,800 crore, at today’s price, what will that bring down the government stake to?A: First of all, let me clarify that there is no firm plan for doing a QIP. It is only one of the options we have mentioned in the enabling resolution that our board has passed. Our annual plan for raising the capital was Rs 5,000 crore, out of that Rs 2,200 crore odd is being infused by government in the next few days. We held the annual general meeting (AGM) for that purpose only. Remaining Rs 2,800 crore is what is proposed to be raised through any of the options including QIP.Q: Or a public issue it says?A: That is right. We have kept all our options open. What option we would go for will depend upon market conditions, government approval and the requirement of funds.Q: If one assumes that that entire amount goes either through a follow-on public offer to non-government bodies then what does it bring down the government stake to? Does it come down to 60 percent? Is it 75 percent at the moment?A: No, government stake is 76.5 percent today. It will go up to a little over 80 percent after Rs 2,200 crore gets infused in. It will come back between 74 percent and 75 percent after this comes.Q: After the public issue if it happens?A: After this much money is raised through whichever mode.Q: Is there any legal hurdle to bringing down the government stake all the way to below 51 percent?A: IDBI Bank is under Companies Act and there is no stipulation that way to bring it down below 51 percent. However, our article of association, does stipulate that government shareholding will remain 51 percent or above at all times.Q: For the amendment of the article of association all you need is a board resolution, you don’t need any legal amendment?A: No, we need to go back to the shareholders.Q: But you don’t need to amend the law?A: Amend the law means we are under Companies Act. So therefore we need to amend the articles and then government as an owner has to take a call because so far the government’s stipulation has been that they will bring down the shareholding not below 52 percent in any public sector bank. Q: Since you are a public sector bank not under the Bank Nationalisation Act or rather banking Regulation Act but more under the Companies Act, the Finance Minister and the Minister of State for Finance have stated in the public space that they want to create for IDBI Bank a holding structure akin to access, which means the government's direct stake holding comes down below 51 percent. Was that discussed in the board meeting at all?A: No. It has not been an item on the agenda because we have no communication from the government on this. Q: Have the executive members of the board in anyway been intimated or the board itself being intimated of their dominant shareholders view? A: No, there is no formal communication from the government. So, therefore there has not been any discussion at the board level. Q: As of now what you have discussed or decided by way of a QIP offering could have been even without the Finance Minister having an idea of changing the holding structure of IDBI Bank? A: You are very right on that. This is in normal course that we have decided. Q: You have some inkling through official or non official channels about when the government might put into practice what it has very public stated. A: We are reading through news papers and through channels only, hearing as to what is being discussed. We know as much as you know. Q: Once again we did see an increase in your non-performing loans (NPLs), from Rs 14,100 crore it has gone up to Rs 14,757 crore so that is a rise of about 5-6 percent in your gross NPLs, how much did the slippages rise? A: We have separately today spoken to the press and mentioned that actually quarter-on-quarter (Q-o-Q), first time slippages have actually come down. In March they were Rs 2,200 crore, in June they were Rs 1,400 crore and this time on gross basis they are Rs 1,200 crore. After netting out recoveries and upgradation they come to the figure that you are looking at about Rs 700 crore odd. So, we are seeing some trend whereby the gross addition is coming down and solutions are emerging and therefore we think this is getting to come under control. Q: This Rs 1,200 crore of fresh slippages, how much of it were from restructured assets? A: From restructured assets, I would not be able to immediately tell you but I don’t think it will be more than Rs 100-150 crore. Q: What is your total kitty of restructured assets? A: That is about 8 percent of the total advances, 6.9 percent now. Q: That is about 15 percent which is stressed?A: This is the gross basis. Overall stressed you can say and it is pretty much similar to what the banking sector is carrying.Q: Another bank which was very close to 10 percent has gotten a notice from the Reserve Bank of India (RBI) in terms of its future actions, you don’t fear that for IDBI? A: We don’t fear that at all but we are conscious of the level of NPLs and also stressed portfolio which all of us are aware is largely due to the overall economic stress and particularly in certain infrastructure sectors where we have been traditionally heavy. We have taken steps; government has taken various policy measures so we are expecting these to ease out in the coming quarter. Q: Finally what have you refinanced through the 5:25 route, how many accounts and what amount of money? A: Amount of money I would not be able to mention right now but I think it is three accounts which we have done. Q: You would not even be able to give me a ballpark figure on the amount?A: I don’t remember because the paper is not before me. However, I would say that these are accounts which are in consortium where we are one of the members. Q: Some more in the pipeline, would you have an idea of how many? A: Some more are in the pipeline, maybe another three or four cases would be in process and we will take a call on them in the coming weeks.Q: Which sectors? A: Mostly in power and steel.