IDBI Capital Market Services, a wholly-owned subsidiary of the Industrial Development Bank of India (IDBI), plans to set up a primary dealership division, for which it has decided to hike its paid up capital from Rs 10 crore to Rs 50 crore.
The board of IDBI Capital Markets has cleared the proposal for entering into primary dealership and is now seeking approval from the IDBI board.
"Since IDBI owns 100 per cent stake in IDBI Capital and they would be subscribing to the entire Rs 40 crore fresh issue their nod is crucial," said senior officials from the institution. On receiving the green signal from the IDBI board, the merchant banker is expected to approach the Reserve Bank of India for clearance.
"The idea to raise the amount to Rs 50 crore is mainly because the RBI guideline pertaining to primary dealership required a firm to have a minimum paid up capital of Rs 50 crore," added officials.
IDBI Capital is already actively trading in the secondary market for government securities through the wholesale debt market of the National Stock Exchange.
Simultaneously, the company is also scouting for a foreign partner to enhance its reach in the international market.
"This is in the initial stages as we have only recently begun considering some proposals for a tie-up. The pact could either be a strategic alliance or in the form of equity participation," said company officials.
Meanwhile, the merchant bank has also decided to undertake advisory and management service for provident funds.
Recently, Coal India, which has the second largest provident fund corpus after the State Bank of India, has given a mandate to IDBI for managing its funds. Consequently, IDBI appointed IDBI Capital as the advisory agent to handle a corpus of nearly Rs 12,000 crore.
In a related development within the FI, the IDBI board has appointed V P Singh, executive director of IDBI as chairman of IDBI Capital Market. The post has been vacant ever since B K Taparia, the former chairman of IDBI Capital Market retired in November.
