Here’s why IDBI Bank shares are surging today

Shares of IDBI Bank, a subsidiary of Life Insurance Corporation of India (LIC), gained more than 5% in early deals on Wednesday amid reports that the government is planning to kick start the privatsation of the lender by the end of this month.

The PSU lender share opened with a gain of 3.07% at ₹48.65 against the previous close of ₹47.20 on the BSE. During the day’s trade so far, the stock gained as much as 5.5% to hit a high of ₹49.8 on the BSE. There was a surge in buying activities as 15.14 lakh shares worth ₹7.43 crore changed hands over the counter compared to the two-week average volume of 12.71 lakh shares.

Shares of IDBI Bank, with a market capitalisation of ₹52,848 crore, were trading higher than 5-day and 200-day moving averages, but lower than 20-day, 50-day, and 100-day averages.

IDBI Bank shares have delivered a return of 70% in the past one year, 30% over the past six months, and 4% since the beginning of the calendar year 2022 (year-to-date basis). In the last one month, the largecap stock has fallen more than 5%, while it has risen 1.5% over the past one week.

As per the latest shareholding pattern available on the BSE, central government owns a 94.71% stake in IDBI Bank. IPO-bound insurance behemoth LIC is a majority stakeholder in the public sector bank with a 49.24% equity share, while the Government of India, as a co-promoter, owns 45.48%.

According to reports, the central government and LIC are looking to sell their stake in IDBI Bank to a private buyer. However, there is no official confirmation about stake sale in the public sector lender. The decision on the quantum of stake sale would be taken in consultation with the Reserve Bank of India.

In May last year, the Cabinet Committee of Economic Affairs (CCEA) had given approval to the government and LIC to sell 100% of their entire stakes in IDBI Bank, along with a transfer of management.

The government has put IDBI Bank stake sale on a fast-track to meet the divestment target for the financial year 2021-22. Last week, the central government filed the draft red herring prospectus (DRHP) with market regulator SEBI to launch a mega initial public offering (IPO) of LIC. The issue size is mentioned in terms of shares where the government is divesting 31,62,49,885 shares in the insurance giant. Retail quota is fixed as 35% of the issue size translating into around 11.06 crore shares for retail investors.