Mumbai: “IDBI Bank has decided to sell its housing loan subsidiary, IDBI Homefinance (IHFL), unlike its earlier plan to merge the unit with itself and may invite bids from potential buyers soon,” a top bank official said.
The move will be aimed at consolidating its home loan finance business which is currently being rolled out through the bank’s own housing finance division and its wholly-owned subsidiary (IHFL) based in Pune.
“After mulling both possibilities (merger and sale), we have now decided to sell the subsidiary as we find it as a more viable option. We have started the process to identify the potential buyer,” a top IDBI bank official said.
“However, given the present market downturn, the unit is unlikely to get an expected market valuation, which may delay the selling process for another few months,” the official said.
“The biggest question is about the valuation. Given the current issues in market, we may not get a good valuation. We may even postpone the sale in that case,” he said.
IDBI Bank took over the erstwhile Tata Home Finance in September, 2003, and renamed it as IHFL, solely meant for selling home loan products. IHFL presently has a home loan portfolio of above Rs2,700 crore with a presence in 18 centres across the country and 150 employees.
The bank decided not to proceed with the merger move owing to the challenges while integrating the two entities in the event of a merger, primarily, issues in the human resources side.
“The biggest challenge of IDBI Bank (in the event of a merger) would be on the human resources side as the pay-scales of IHFL employees and the bank are different,” the official said.
IDBI Bank has a home loan portfolio of around Rs12,000 crore. If a merger is effected, the bank’s home loan portfolio would increase to around Rs14,000-15,000 crore, catapulting it to a top player in the housing finance business.
On the other hand, if the bank proceeds with the sale proposal, it would lose the customer base and a healthy growing business of IHFL.
IHFL had posted a net profit of Rs30 crore in FY’08.
“Though the lender is yet to identify any player for the sell out, it may give preference to a local buyer than going for a foreign party,” the official said.
“There will be a preference for Indian bidders,” he said.