IDBI Bank to halve stake in NSE

Plans to do so by end-March if valuations are okay

IDBI Bank is planning to liquidate nearly half its stake in the National Stock Exchange (NSE), the country's largest bourse, before the end of the current financial year (March 31). The move comes when the bank's profitability has eroded due to a rise in bad loans. The money mobilised through the stake sale will help the government-owned lender to augment its capital adequacy. IDBI currently owns nearly five per cent or 2.2 million shares in NSE, which is being pressurised by stakeholders to get listed.

A senior IDBI official told this newspaper it had been one of the initial investors and had supported the bourse's development over a long period. Now, however, raising of resources for capital adequacy to support the bank's growth is a priority. "We would like the transaction to take place by March, so that the money be realised in this fiscal year's balance sheet," he added. Although in need of capital, the lender has said it will only offload stake if the valuations are appropriate. The previous reported stake sale in NSE was in September 2015, when IFCI sold 1.5 per cent to a foreign investor, at Rs 3,900 a share, valuing the exchange at Rs 17,500 crore.

Sale of IDBI Bank's stake to another foreign investor could mount pressure on the exchange to expedite its listing process. Its foreign shareholders have been opposing a restructuring plan floated by NSE and are pushing the exchange to go public. A little more than 30 per cent of the shareholding is in the hands of investors abroad.

Reserve Bank of India's directive for banks to recognise and make provisions for bad assets have raised pressure on the latter to raise capital by disposing their non-core assets. State Bank of India is another state-owned lender which, with its SBI Capital Markets arm, owns 14.5 per cent stake in the exchange.

In the first nine months of 2015-16, IDBI suffered a loss of Rs 1,929 crore, as against net profit of Rs 327 crore in the same period a year before. The Mumbai-based lender had a loss of Rs 2,183 crore in the December quarter, due to a four-fold increase in provisioning for bad loans. These and write-offs dented the bottom line. Gross NPAs as a percentage of total advances rose to 8.94 per cent in December 2015 from 5.94 per cent at end- December 2014. For the nine months, provisioning grew 146 per cent to Rs 4,530 crore, from Rs 1,838 crore. The provision coverage ratio was 62.92 per cent at end-March 2015. The capital adequacy ratio was 13 per cent in December 2015, with tier-I capital at 8.71 per cent under the Basel-III norms.