State-owned IDBI Bank said it proposes to dilute stake in some non–core businesses to shore up capital base. The board of the bank has approved in–principle the proposal to divest some of its non–core investments subject to compliance with all applicable laws and regulations and final approval obtained for each transaction, IDBI Bank said in a regulatory filing to the stock exchanges. The decision was taken at the board meeting held on Tuesday.
Finance Minister Arun Jaitley in 2015 had hinted at a change in IDBI Bank wherein the government would continue to hold a majority stake, yet keep it at arm’s length. Citing the example of Axis Bank, he had wondered if IDBI Bank could follow that model.
But since then, there has not been much progress on the plans due to one reason or another. IDBI Bank has a large portfolio of real estate which was not taken into consideration during the valuation exercise. The bank is looking at this aspect and trying to find a way out so that its valuation gets better. As far as the stake sale of IDBI Bank is concerned, both the government and the bank’s board have already given nod for Qualified Institutional Placement (QIP). The government’s holding in IDBI Bank stood at 73.98%as on December 2016. “The Public Sector Banks, including IDBI Bank, have been allowed to raise capital from public through follow on public offer (FPO) or QIP by diluting Government of India holding up to 52% in a phased manner based on their capital requirement, the government said.
