IDBI Bank unveils three-year revamp plan; defers QIP issue

A day after Finance Minister Arun Jaitley said the government was open to bring down its stake in IDBI Bank to below 50 per cent, the lender today announced a "transformational" plan involving a Rs 20,000-crore fund raising plan over the next three years.
Citing poor market conditions, the troubled state-run lender has also put on hold its Rs 3,771-crore stake sale plan to institutional investors. Its stock closed 1.8 per cent up at Rs 59.50 on a day when the Sensex rallied 3.4 per cent.
The revamp plan includes doubling the bank's business volumes and reducing gross NPA level below 3 per cent.

"The plan rests on business growth and our approach will be to catch up with the industry. We will double our business from around Rs 5 lakh crore in FY16 to Rs 10 lakh crore in FY19, representing CAGR of over 20 per cent per annum," Managing Director and Chief Executive Kishor Kharat told reporters here.
However, he was quick to add that the "transformational plan" has nothing to do with Government's move to reduce stake in the bank.
"The plan has nothing to do with whether we remain a public sector or a private sector bank, because it does not talk abut composition of ownership or holding. On a standalone basis, we have made this plan for transforming the bank and therefore, the thrust is more on business transformation."

Kharat said NPAs will remain an issue for some more time but expressed confidence the bank will be entering the next fiscal with a lighter stress.

"Our endeavour will be to bring down gross NPA to 3 per cent and net NPA to near 0 per cent by FY19," he said. For the December quarter, its gross NPAs jumped to 8.94 per cent from 5.94 per cent, while net NPA rose to 4.60 per cent.
As part of the revival plan, the bank is looking at raising around Rs 19,000-20,000 crore equity capital over the next three years, he said. Besides, it will be raising Rs 4,000 crore from tier I bonds and Rs 8,000-9,000 crore through tier II bonds.

Kharat said he would like to list the bank's subsidiaries
- IDBI Capital, IDBI AMC, IDBI Federal - but no final decision has been taken so far. "Right now, we will monetise to the extent of our need only."
The bank has also put on hold its plan to raise Rs 3,771 crore through qualified institutional placement (QIP) route due to volatile market conditions.
"We have put the QIP plans on hold for now because the price is not right at this point in time. The investor interest during our roadshow was very good, but they wanted more clarity around the impact of AQR (asset quality review). Now that things are clearer, we will wait for the price to come back up," Kharat said.

It can be noted that on December 31 last, IDBI Bank had informed exchanges that it had got the government mandate to sell shares to institutional investors to raise Rs 3,771 crore through a qualified institutional placement offer.
For the next three years, the bank will also be looking at re-balancing its portfolio mix with more focus on MSME, agriculture and retail credit. Its focus will be adding more higher credit rated clients to its books.
It will be strengthening its net interest margin to around 3 per cent in FY19. The bank will also be focusing on digitising its processes.

Kharat said the bank will expand its branches to 4,000 branches from 1,800 branches now
It will also be increasing its manpower.
"We will also very shortly be introducing employee stock ownership plan (Esops) option for our employees which is now an industry requirement," Kharat said.
The bank will also be looking at revising its wage by introducing a fixed-cum-variable package.