The Economic Times daily newspaper is available online now.

    IDBI Bank plans to raise Rs 6,000 cr via share placement

    Synopsis

    IDBI Bank is initially planning to raise equity of about Rs 6,000 crore through a placement of shares with institutional investors, investment banking sources aware of the plans told ET.

    IDBI-AgenciesAgencies
    IDBI Bank is initially planning to raise equity of about Rs 6,000 crore through a placement of shares with institutional investors, investment banking sources aware of the plans told ET. It has begun discussion with the bankers and might appoint about half a dozen of them to help raise the equity capital, said people with direct knowledge of the matter.

    The bank has sent the Request for Proposal (RFP), which carried a ballpark figure of the initial fundraising target. Investment bankers are expected to submit bids by August 28. Its own capital market arm IDBI Caps will be one of the bankers. IDBI Bank has taken the first step to raise equity capital and is likely to go to the market in the second half of FY21, CFO Ajay Sharma told ET. “It is most likely to be through a preferential allotment or a qualified institutional placement,” he said.

    It would be the first time in many years that IDBI Bank will be seeking funds from investors via a share sale. "We are back to profits this year and though the capital needs of the bank are not urgent, we believe it is the right time to go to the market," the CFO said. The bank has already taken an enabling resolution to raise up to Rs 11,000 crore from its shareholders and this latest initiative is part of that program. IDBI Bank posted a quarterly profit for the first time in 13 quarters in March mainly due to write backs in provisions, higher recoveries and the steepest decline in slippages in three years.

    The bank expects to soon exit the central bank’s penal prompt corrective action (PCA) framework, which forces lenders to conserve capital and restricts dividend payments, branch expansion, management compensation and loan disbursements growth. It has been in PCA since May 2017. Latest results show that the bank reported a Rs 144 crore net profit for the June quarter on account of a reversal of Rs 1,335 crore of bad loan provisioning. This compares with a loss of Rs 3,801 crore in the year-ago period.

    The bank's provision coverage ratio is at 94.7%, meaning it has largely provided cover for all its bad loans, although gross NPAs at 26.81% of the loan book are amongst the highest in the industry. Its capital adequacy at 13.37% is above the mandatory required 9%. But the bank will have to accommodate owner Life Insurance Co in case the insurer wants to keep its stake at 51%.

    "If LIC wants to keep its stake at 51% then some portion of the issue will have to be reserved for them. Otherwise, LIC's stake will no longer be in the majority," said a banker aware of IDBI's plans. LIC took a majority stake in IDBI last year under directions from the government and has 12 years to bring its stake down to 40%.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in