IDBI Bank puts its 16% stake in Sidbi on block

In an attempt to raise capital, IDBI Bank has put on block its stake in Sidbi, the financial institution focused on financial small and medium sized companies.

IDBI Bank has 16.25 per cent in Sidbi and is looking at selling the entire stake, said two senior officials familiar with this development. IDBI Bank will accept the last bid for its stake till August 16.

Among other shareholders, State Bank of India has the largest stake at 16.7 per cent followed by IDBI. Government owns 15.4 per cent stake while Life Insurance Corporation as 12.2 per cent stake in Sidbi. The other investors have less than 4 per cent stake which includes public sector banks and state owned insurance companies.

Sidbi has earned net profit of RS 1120 for the fiscal year 2016-17, marginally lower than Rs 1177 criore earned in the previous fiscal year. It has capital adequacy ratio of 28 per cent and gross bad loans of 1.2 per cent.

Sidbi was originally 100 per cent owned by IDBI, when it was a term lending institution. Later in 2000, it divested 51 per cent stake in favour of government owned banks and insurance companies.

Later in 2004, IDBI Bank sold 30 per cent stake to among banks and other term lending institutions for a value of Rs 400 crore. IDBI Bank has appointed SBI Caps as its merchant bankers but has not indicated a reserve price for its stake.

IDBI Bank, which has reported losses for two consecutive years will require atleast Rs 9500 crore capital infusion from government to stay afloat according to an estimate by rating company Icra. The company has infused just about Rs 1900 crore in the bank before the end of fiscal year 2016-17.

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“IDBI Bank has identified several non core assets valuing Rs 6000 crore which will be put on block to raise capital,”said a senior bank official who did not want to be named.

The move to sell the stake comes at a time when Sidbi is headless and it is run by two deputy managing directors- Ajay Kapur and Manoj Mittal. Senior officials from the finance ministry said that M Mustafa, joint secretary, department of financial services is tipped to join the financial institution as its CEO.