Home >Industry >Govt open to talks with strategic investors for IDBI Bank: Jayant Sinha

Mumbai: The government is open to talks with strategic investors for giving IDBI Bank a private bank character, the first step towards which is the qualified institutional placement (QIP) of the lender’s shares, said minister of state for finance Jayant Sinha.

“Let us see how the QIP book-building process unfolds and as part of that we will be happy to discuss with potential strategic investors how the transformation of IDBI Bank can take place," said Sinha on the sidelines of an event on Friday.

The public sector bank is targeting to raise 3,771 crore through the QIP and seven banks were mandated to hawk the lender’s shares to international investors through road shows between 14 and 25 January.

Post the QIP, the government’s stake will reduce from the current 80% in the bank.

The road shows have received mixed response from investors as they seek more clarity on how much stake the government is willing to hold and how the Reserve Bank of India’s asset quality review will impact the lender’s financials, Mint reported on 28 January.

IDBI Bank’s gross bad loans are at a whopping 6.92% of its total advances as of 30 September. Additionally, the lender also reported restructured assets worth 20,089 crore, with cases largely from the infrastructure and power generation sectors.

In all, the bank’s stressed loans are a more than 16% of its total loan book. The Reserve Bank of India’s review of banks’ asset quality and the mandate to identify and provide for visibly stressed accounts is expected to hit IDBI Bank’s profitability. The public sector lender’s capital base is also eroding with its capital adequacy ratio at 11.66% as of 30 September.

In October, the government had said that it intends to transform IDBI Bank into a private sector bank on the lines of Axis Bank. Sinha reiterated this intention on Friday at the event. The government still holds a sizeable 11.55% stake in Axis Bank through Specified Undertaking of the Unit Trust of India (SUUTI).

Analysts have been pointing out to the merits of selling this stake but the government hasn’t clarified its plans. Sinha said that “all options" with regard to SUUTI are still under consideration.

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