Life Insurance Corp. of India (LIC)-owned private sector lender IDBI Bank has decided to sell its stakes in 19 unlisted companies for at least ₹175 crore, showed a document seeking bids.
According to the document, the bank is looking for bidders for more than 170 million shares in companies, including Neelachal Ispat Nigam Ltd, Haldia Petrochemicals Ltd, Gujarat NRE Coke Ltd, Konaseema Gas Power Ltd and Mysore Paper Mills Ltd.
A person aware of the development said, requesting anonymity, that in most of these companies IDBI Bank had converted debt to equity as part of stress resolutions, and now plans to exit them. These also include equity stakes taken as part of the erstwhile corporate debt restructuring (CDR) mechanism, wherein distressed borrowers were given a breather through delayed repayment timelines and lower rates of interest. “The bids are open to retail as well as institutional bidders," he added.
The bank is looking to sell 58.5 million shares of Konaseema Gas Power, 24 million shares of Gujarat NRE Coke, 27 million shares of Haldia Petrochemicals and 18 million shares of Neelachal Ispat Nigam.
While potential buyers will have to bid for its entire holdings in most of the companies, in the case of Mysore Paper Mills, investors can buy shares with a minimum bid size of 500,000 shares, and in multiples of 100,000 thereof. In the case of Haldia Petrochemicals investors can buy a minimum of 1 million shares and in multiples of 100,000 shares thereafter.
According to IDBI’s bid document, each bidder may conduct its own independent investigation and analysis before submitting their bids. “The bank makes no representation or warranty and shall incur no liability under any laws, statutes, rules or regulation, and its liability will stand extinguished on receipt of payment from the successful bidders and handing over of the original share certificates along with signed transfer deed," it added.
An email query to IDBI Bank seeking comments remained unanswered.
IDBI Bank, like other bad loan-burdened banks, is trying to sell non-core assets, including equity stakes. The bank, as Mint reported on 30 May, has started the process of selling its mutual fund business. The lender has hired ICICI Securities Ltd to advise it on a 100% sale of its mutual fund businesses, IDBI Asset Management Ltd and IDBI MF Trustee Co. Ltd.
IDBI Bank also wants to sell its stake in IDBI Federal Life Insurance Co. Ltd, a three-way joint venture between IDBI Bank, Federal Bank and Belgian insurer Ageas. IDBI holds a 48% stake, while Federal Bank and Ageas own 26% each.
In the March quarter of FY19, IDBI Bank had reported net losses for the 10th straight quarter, as it continued to set aside higher provisions for its bad loans. Net loss for the quarter stood at ₹4,918 crore, against ₹5,662 crore in the corresponding quarter of last year. As a percentage of total loans, gross non-performing assets (NPAs) stood at 27.47%, compared to 29.67% in the previous quarter, and 27.95% in the year-ago period.
In January, LIC had completed acquiring a 51% stake in IDBI Bank, after it was approved by the Union cabinet in August 2018.
The government has been trying to privatize IDBI Bank for the past few years and the deal with LIC not only allowed it to pare its stake in the loss-making lender, but also helped the life insurer enter the banking sector.
“The deal, conceptualized in June 2018, is envisaged as a win-win situation for both IDBI Bank and LIC, with an opportunity to create enormous value for shareholders, customers and employees of both entities through mutual synergies," the bank had said in a regulatory filing on 21 January.