IDBI Bank steps-up non-core asset sales, seeks to offload 5% in CCIL
Mumabi: IDBI Bank Ltd has decided to sell its entire 5% stake in Clearing Corp. of India Ltd (CCIL), according to two people aware of the development, as it looks to strengthen its weak capital base through the sale of assets that are not central to its main business.
The bank is aiming to garner around Rs5,000 crore in this financial year through sale of non-core assets, IDBI Bank chief Mahesh Kumar Jain had said in June.
IDBI Bank has invited expressions of interest from entities interested in buying its stake in CCIL. IDBI Capital Markets & Securities Ltd has sought bids on behalf of the bank.
In June, the bank sold 2.5% stake in CCIL, a clearing and settlement platform for transactions in fixed income market include those related to foreign exchange. Following this stake sale, the bank “received serious enquiries for its balance stake as well,” it said in a statement.
According to IDBI Bank, as part of its turnaround strategy, it is actively pursuing similar opportunities to monetise its non-core assets and investments and has appointed an adviser for strategic sale of “one of its major subsidiaries.”
It added that selection of advisers for other identified investments in subsidiaries, associates, and joint ventures are at an advanced stage and would be concluded shortly.
The bank holds 48% stake in joint venture IDBI Federal Life Insurance Co. Ltd.
Besides the insurance joint venture, the bank has a stake in IDBI Trusteeship Services Ltd, IDBI Asset Management Ltd, Small Industries Development Bank of India, National Securities Depository Ltd, NSDL E-governance Infrastructure Ltd, and National Stock Exchange of India Ltd, among others.
On 9 May, the Reserve Bank of India invoked so-called prompt corrective action against IDBI Bank because of its rising bad loans and negative return of assets.
Banks under PCA are mandated to step up recoveries of bad loans, reduce risky loans, strengthen their capital base and restrict branch expansion, among other measures, to improve their balance sheet.
As a percentage of total loans, gross NPAs stood at 21.25% at the end of the March quarter, compared with 15.16% in the previous quarter and 10.98% in the same quarter a year earlier.
Apart from selling non-core assets, the bank is focusing on restricting corporate loans, increasing retail advances, reducing operational costs and increasing loan recoveries.
On Wednesday, IDBI Bank said it had got shareholders’ approval to raise Rs5,000 crore through various methods of share sale, including qualified institutional placement, and Rs5,000 crore through bond issues in one or more tranches.
IDBI Bank’s capital adequacy ratio (CAR) was 10.7% as of the end of March, above the regulatory mandate of 10.25%. CAR is an indicator of a bank’s financial strength expressed as the ratio of capital to risk-weighted assets.