IDBI Bank stock gains 3% as RBI okays 3 bidders for majority stake sale

Shares of IDBI Bank moved higher by 3 per cent to Rs 102.75 on the BSE in Friday’s intra-day trade on reports that the Reserve Bank of India (RBI) has given clearance to three prospective bidders for a majority stake in the Bank.

At 11:17 am; IDBI Bank was trading nearly 2 per cent higher at Rs 101.90 on the BSE. The stock had recovered 5 per cent from its intra-day low of Rs 97.50. It had hit a 52-week high of Rs 107.98 on July 29. Thus far in the calendar year 2024, IDBI Bank has outperformed the market by surging 52 per cent, as compared to 12.4 per cent rise in the BSE Sensex.

As per Business Standard report, the finance ministry is likely to provide private data room access to potential bidders of IDBI Bank as soon as next week after it received a fit and proper nod for three suitors from the RBI. Such access will allow interested bidders to obtain detailed financial information about the bank to carry out due diligence, the newspaper reported quoting senior government officials.

The government would likely open bids for the lender before the end of the financial year, Tuhin Kanta Pandey, the country's secretary responsible for the stake sale, had said last week.

As on June 30, 2024, the Government of India (45.48 per cent stake) and the state-owned Life Insurance Corporation of India (LIC) (49.24 per cent stake), together held 94.71 per cent stake in IDBI Bank.

On October 7, 2022, the Centre invited expression of interest (EoIs) for IDBI Bank and offered to sell a total of 60.72 per cent stake in the bank, including 30.48 per cent from the government and 30.24 per cent from LIC, along with the transfer of management control in the bank. The government has received the EoI from multiple bidders on January 2, 2023. 

Meanwhile, IDBI Bank registered profit for the fourth consecutive year, with each year’s performance improving over the previous year. The Bank registered an all-time high net profit of Rs 5,634 crore in FY 2023-24 while registering an annualised growth of 55 per cent over the previous year.

IDBI Bank has maintained comfortable capitalisation levels with more than adequate cushion over the minimum regulatory requirement, supported by significant amount of equity infusion by the LIC, the Government of India, and qualified institutional placement (QIP), as well as internal accruals after the bank started posting profits from FY21 onwards. The bank has a stable and granular deposit base, with CASA plus retail term deposits forming a major portion of its total deposits. The bank’s earnings and profitability also improved year-on-year post coming out of the prompt corrective action (PCA).

The extent of respective shareholding to be divested by GoI and LIC will be decided at the time of structuring the transaction, in consultation with RBI. CARE Ratings expects the bank to receive required support from GoI and LIC to enable smooth divestment of the shareholding.