IDBI Bank share edges lower on stake sale report

Shares of IDBI Bank fell nearly 1% in opening trade on Wednesday amid buzz that the Life Insurance Corporation (LIC) of India and the central government are likely to offload their stake in the lender. As per a report, expression of interest (EoI) for the divestment process is likely to be invited by next month.

IDBI Bank witnessed choppy trade today, with the share price opening tad lower at ₹43.2 against the previous closing price of ₹43.45 on the BSE. It declined as much as 0.7% to hit a low of ₹43.15, while it touched a high of ₹43.75 in the first hour of trade so far.

At the time of reporting, IDBI Bank shares were trading 0.35% lower at ₹43.30, while the BSE benchmark Sensex was quoting at 58,883, down 313 points.

According to reports, the central government and LIC may sell up to 65% stake in IDBI Bank to a private buyer. However, there is no official confirmation about stake sale in the public sector lender. Both the parties will take decision on the stake sale after due diligence with the Reserve Bank of India.

As per the latest shareholding pattern available on the BSE, insurance major LIC of India is a majority stakeholder in the state-owned sector bank with a 49.24% equity share, while the Government of India, as a co-promoter, owns 45.48%.

LIC is currently the promoter of IDBI Bank with management control and the government is the co-promoter. The state-owned insurer first acquired the stake in debt-laden IDBI Bank in 2018 and over the years it raised its shareholding to become a majority stakeholder.

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.

For the first quarter ended June 30, 2022, IDBI Bank reported a net profit of ₹756 crore in the three months to June, up 25% year-on-year, on account of lower provisions. Net Interest Income (NII) dipped marginally to ₹2,488 crore against ₹2,506 crore in the year-ago quarter. Net interest margin (NIM) stood at 4.02% for Q1 of FY23, compared to 4.06% in the same period last year. Gross non-performing assets (GNPAs) improved to 19.9% as of June 30, 2022, against 22.71% in the year-ago period. Net NPAs dipped to 1.25% compared to 1.67%. The lender expects GNPAs to be below 15% and net NPA to be lower than 1.25% by March 2023.

The government has put IDBI Bank stake sale on a fast track to meet the divestment target for the financial year 2021-22. Besides, it is also planning to invite EoI for strategic disinvestment in state-owned companies Bharat Earth Movers Limited (BEML) and Shipping Corporation of India (SCI). In the current financial year, the government has raised ₹24,544 crore through disinvestment in PSU units against a full-year budget target of ₹65,000 crore. The government is hopeful to meet this fiscal’s disinvestment target with the sale of stakes in these public entities by the end of March 2023.