Home > market > stock-market-news > IDBI Bank plans Rs4,000 crore share sale

Government-controlled IDBI Bank Ltd plans to raise as much as 4,000 crore to bolster capital buffers as bad loans increase.

The board of the Mumbai-based bank approved raising the money through a share sale to institutional investors or a follow-on public offer, an exchange filing showed on Monday. No timing for the transactions was specified.

The fund-raising will help the lender, which had outstanding loans of 2 trillion as of 31 March, to absorb increased soured debt. Gross bad loans at IDBI Bank rose to 4.9% of total lending as of March from 3.2% a year earlier, exchange filings showed.

The company had a capital adequacy ratio of 11.68% as of 31 March, lower than the 12% required by the government. G. S. Sandhu, the Indian finance ministry’s banking secretary, said earlier this month that the government will allow its stake in several banks fall as low as 51% to let them raise equity capital.

IDBI Bank shares rose 1.4% to 113.80 at 11.27am in Mumbai on Monday, compared with a 0.9% gain in the S&P BSE Bankex Index, which tracks 12 Indian lenders.

The government owns 76.5% of IDBI, data compiled by Bloomberg shows. The bank was started in 1964 by an act of parliament as a subsidiary of the Reserve Bank of India (RBI). The government took ownership in 1976 and the lender was listed in 1995. Bloomberg

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