State Finance Corporations Health Key To Sidbi Valuation

Bankers are resisting the pricing of the Sidbi shares at Rs 50 (Rs 40 premium on a face value of Rs 10) as has been recommended by merchant banker SBI Caps. IDBI is to divest 51 per cent stake in Sidbi in favour of government-owned or -controlled financial intermediaries.

According to sources, 11 of the 17 SFCs are in a bad shape with their net worth being wiped out. "This will be a burden on Sidbi. The pricing of the Sidbi shares should reflect this burden," they said.

At a recent meeting on Sidbi divestment, attended by banks and financial institutions, the pricing of Rs 50 was considered too high and SBI Caps has been directed to have a second look at the valuation.

 

The merchant banking arm of the State Bank of India will make a fresh presentations next month to banks and financial institutions willing to pick up stakes in Sidbi offering five-year projections of Sidbi.

The list of banks and institutions who have evinced interest in picking up stakes in Sidbi includes SBI, Bank of Baroda, Canara Bank, Punjab National Bank, Life Insurance Corporation and General Insurance Corporation.

According to sources, bankers are not willing to shell out more than Rs 35 on a Sidbi share. SBI Caps is likely to peg the revised price at Rs 35-40, a Sidbi insider said.

At Rs 50, by divesting 51 per cent stake in Sidbi, IDBI would have posted capital gains of Rs 920 crore. IDBI has invested Rs 230 crore in Sidbi at a face value of Rs 10 per share for 23 crore shares.

The Union budget for 1997 had announced delinking of Sidbi from IDBI and it has taken over two years to implement it. The President ascent to bill delinking Sidbi from IDBI was given in March.

It may be recalled that SS Kholi, chairman and managing director (CMD) of Punjab

National Bank, has taken over as acting chairman and managing director of Sidbi after Shailendra Narain, its first CMD stepped down.