IDBI Bank invites bids for MF arm; ICICI Securities selected as advisor

The IDBI Bank, under fire over its pile of non-performing assets (NPAs), has invited expression of interest (EOI) to divest its entire stake in IDBI Asset Management (AMC) and IDBI MF Trustee Company.

The move comes after LIC completed the acquisition of a 51 per cent stake in IDBI Bank in January.

Earlier, it was speculated that IDBI AMC could get merged into the LIC Mutual Fund (MF). However, the bank is, instead, monetising the asset management business.

Industry players believe that a merger of IDBI AMC with LIC MF could have faced regulatory hurdles with the LIC already holding an 18.5 per cent stake in UTI AMC. On the other hand, IDBI AMC operating as a standalone entity would have put LIC in further crosshairs with the market regulator Securities and Exchange Board of India (Sebi), they said.

Sebi’s cross-holding norms don’t permit a single sponsor to hold more than 10 per cent stake in more than one AMC. LIC's stake in both LIC MF and UTI MF is in excess of this limit.

For the stake sale, IDBI has mandated ICICI Securities as the advisor. The potential investors have time till June 10 to submit their interest, the investment bank said in a newspaper advertisement on Wednesday.

With quarterly average assets of Rs 9,297 crore as of March 31, 2019, IDBI AMC is outside the top-20 fund houses in the country in terms of assets managed.

The sale of IDBI AMC comes at a time when certain financial services groups are trying to enter the AMC business.

"It is a decent-sized AMC and even we might be interested. However, any new buyer will have to check if there are any outstanding commitments on commissions, which could have an impact on the profit margins," said a senior official of a financial services group, which has got in-principle approval from regulator to set up an AMC business.

To deal with its NPA issues, IDBI, in the past, sold its stake in the National Stock Exchange to LIC. It also sold its office building in the Bandra-Kurla Complex to Sebi for an estimated value of around Rs 1,000 crore. As of September 30, 2018, IDBI bank had gross NPAs of 32 per cent and net NPAs of 17.3 per cent.

Meanwhile, the asset management industry has been grappling with slowing equity flows and volatility in the debt markets since the IL&FS crisis in September last year. In April, the equity flows slipped to a 31-month low of Rs 4,608 crore with industry sources suggesting May to also be a tepid month for flows.