IDBI Bank rose 7.66% to settle at Rs 28.80 after the Union Cabinet approved an infusion of Rs 4,557 crore in the bank by the government.
The said capital infusion will help in completing the process of IDBI Bank's turnaround and enable it to return to profitability and normal lending, and giving government the option of recovering its investment at an opportune time.
IDBI Bank needs a one time infusion of capital to complete the exercise of dealing with its legacy book. It has already substantially cleaned up, reducing net NPA from peak of 18.8% in June 2018 to 8% in June 2019. The capital for this has to come from its shareholders. LIC is at 51% and is not allowed to go higher by the insurance regulator. Of the Rs 9,300 crore needed, LIC would meet 51% (Rs 4,743 crore). Remaining 49%, amounting to Rs 4,557 crore, is proposed from government as its share on one time basis.
After this infusion, IDBI Bank expects to be able to subsequently raise further capital on its own and expects to come out of RBI's Prompt Corrective Action (PCA) framework sometime next year.
Shares of IDBI Bank hit a 52-week high of Rs 65.8 on 09 Jan 2019. The stock hit a 52-week low of Rs 23.55 on 23 Aug 2019. IDBI has underperformed the market in past one year, sliding 56.08% as against Sensex's 3.51% fall.
On a consolidated basis, IDBI reported a net loss of Rs 3821.27 crore in Q1 June 2019 over a net loss of Rs 2383.03 crore in Q1 June 2018. Total income declined 8.1% to Rs 5927.76 crore in Q1 June 2019 over Q1 June 2018.
As on 30 June 2019, the government held 46.46% stake in the IDBI Bank. LIC of India held 51% stake in the bank.
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