Idbi Bank Plans To Dilute 20% Equity
IDBI Bank is planning to dilute 20 per cent of equity stake in the current fiscal to bring down the promoters' holding to the central bank stipulated level of 40 per cent.
Currently, IDBI and SIDBI hold 71 per cent of the total equity in the bank, while the rest is held by the public.
Gunit Chadha, managing director and chief executive officer of IDBI Bank, said: "Though the Reserve Bank of India has not given any deadline to bring down the promoters' holding, our promoters have strongly indicated their preference to complete the entire exercise by September. The board has also discussed the issue and we are looking at an equity dilution of 20 per cent."
However, he refused to disclose whether the equity dilution would be through equity expansion or through dilution of promoter holdings directly. Chadha said, "We have not yet decided on the route for the equity dilution."
He added that the bank was open for private placement and overseas listing also. Earlier, IDBI Bank had appointed Arthur Andersen as its statutory auditors to prepare the accounts as per Indian and US GAAP requirements.
It may be noted that the bank's shareholders, in the last annual general meeting, have given their approval for an employee equity stock option plan.
The plan, when completed, would cover two-thirds of the staff and 10 per cent of the total equity.
Chadha said, the bank would scale-up operations by doubling its existing coverage of 46 cities in this fiscal.
He added that the existing branch network would also be doubled along with expansion of off-site ATM's.
He said that operational expenditure of the bank was likely to be higher this fiscal because of higher capital expenditure and manpower cost.
The bank has allocated around Rs 55 crore for capital expenditure during the current fiscal, to be used for expanding the existing branch and ATM networks, and also for creating a technological platform for back-end operations.
Chadha said, "During the last two years, we have successfully reduced the cost of borrowing from 10 per cent to 8.6 per cent for the quarter ended June 30, 2001. In the last quarter alone, the net interest rate margin has improved by 10 basis points to 2.1 per cent." This, he claimed, would have huge multiplier effect on the bottomline.
He added that the bank was likely to enter into an agreement with a non-life insurance company for offering risk products.