IDBI Bank seeks shareholders' nod to raise for Rs 50 billion in capital

Public sector lender IDBI Bank is seeking shareholders' nod to raise capital upto Rs 50 billion by issuing fresh shares through various routes including Qualified Institutional Placement (QIP).

In notice to shareholders for annual general meeting slated for August 13, 2018, IDBI said the resolution seeks to enable the Bank to offer, issue and allot equity shares aggregating upto Rs 50 billion (inclusive of premium amount).

It could tap investors through public issue, rights issue, preferential issue, private placement basis and QIP, etc. The Special Resolution passed at the last AGM held on July 18, 2017 for Issue of Capital under QIP route, is valid only for one year upto July 17, 2018 for QIPs.

In a related development, the board of directors of Life Insurance Corporation of India LIC, which is meeting on Monday, is likely to give its nod to the proposal to increase the insurer’s stake to 51 per cent in the bank.

The government owns 85.96 per cent of IDBI Bank, while LIC holds 7.98 per cent at end of June 2018, according to filings with BSE.

The LIC board is expected to discuss a blueprint for reviving the bank and, accordingly, take a decision. LIC has done initial work for due diligence on IDBI Bank, which is under RBI Prompt Corrective Action (PCA) framework due high level of non-performing assets (NPAs). Its gross NPAs stood at 27.95 per cent (Rs 555.88 billion) at en of March 2017.

The discussion with IDBI officials for plan and review of existing work would be more substantive after LIC board meeting, IDBI Bank executive said.

Bank has to maintain its Tier I capital in accordance with the relevant Regulatory guidelines issued from time to time. In view of ongoing implementation of BASEL III norms and consequential capital charge, there is a need to increase the capital to further strengthen the Capital Adequacy Ratio.

Its capital adequacy ratio stood at 10.41 per cent (common equity tier I of 7.42 per cent) at end of March 2018.

For the full year ended March 2018, it has booked a net loss of Rs 82.37 billion against a net loss of Rs 51.58 billion in 2016-17.