Mumbai: With a view to consolidate its home loan finance business, IDBI Bank is mulling the merger or sale of its wholly-owned subsidiary, IDBI Homefinance (IHFL), by end-this fiscal, a top official of the bank said.
“It doesn’t make sense for both the bank and its subsidiary to sell the same products. We plan to either merge or sell IHFL,” a highly-placed IDBI Bank official told PTI.
“The bank’s board is likely to take a decision on the matter by the end of March next year,” the official 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, at present, has a home loan portfolio of above Rs2,700 crore with a presence in 18 centres across the country and 150 employees.
In the event of a merger, the biggest challenge IDBI Bank would have to face will be on the human resources side as the pay-scales of IHFL employees and the bank are different.
“This has to be looked into during the integration process,” the official said.
However, IDBI Bank, which has a home loan portfolio of around Rs12,000 crore, would lose the customer base of IHFL in case of a sale and this factor too would weigh with the management when it makes its decision.
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.
For a merger, Reserve Bank approval needs to be sought, the official said.
“Getting regulatory approval for the merger of the bank and its subsidiary will not be a major task as IHFL is wholly-owned by the bank. The merger would be just a technical procedure,” the official noted.
For the year ended March 2008, IDBI Capital posted a net profit of Rs30 crore.