Mumbai: State-owned banks in India have non-core assets worth $8 billion that can be liquidated for capital needs, according to a report released by Jefferies on Monday.
The valuation was arrived at by considering bank shareholding patterns in 48 financial services companies from the Registrar of Companies (RoC). These non-core assets include businesses such as life and non-life insurance, stock exchanges, credit rating and information agencies and depositories, among others.
The research agency employed multiple valuation methodologies but largely driven by previous comparable deals to arrive at the holding value, the report said.
“We agree not everything can or will be sold, but the need to unlock value from the non-core assets has never been higher than today," Jefferies analysts Nilanjan Karfa and Anugrag Mantry noted in their report.
According to Karfa and Mantry, state-owned banks will need capital up to $53 billion over the next four years. Of this, $23 billion will be required for fixing the stress on the balance sheet, while the remaining will be needed for funding future growth.
Public sector lenders such as IDBI Bank, Bank of India, Oriental Bank of Commerce, Canara Bank and Andhra Bank can benefit the most through liquidation of non-core assets.
IDBI Bank’s non-core holdings worth nearly ₹ 6,000 crore represent 58% of the bank’s market cap, said Jefferies.
IDBI Bank’s stake in SIDBI, worth ₹ 2,780 crore and that in National Stock Exchange (NSE) valued at about ₹ 1,050 crore may prove to be the assets of highest value for the bank if it chooses to sell non-core assets. To be sure, the bank had expressed its intent to sell its shareholding in NSE last financial year, though it has been unable to close the deal.
Value of non-core holdings for Bank of India is at 21% of the bank’s market capitalisation, with a bulk of that centered in the insurance subsidiary.
Similarly, Andhra Bank’s holding in IndiaFirst Life Insurance is expected to be worth ₹ 530 crore and will prove to be the biggest accrual for the bank if it chooses to take up any such liquidation measure.