According to estimates, keeping the risk-weighted asset base of IDBI at December 2017 levels, these capital-strengthening efforts may not help even if the bank’s bad loan write-offs are just 10 per cent of its net NPA. Experts however, said the write-offs were likely to be more than 10 per cent given the Q3 trend, which will add pressure on the capital front.
IDBI is planning to sell more of its non-core assets such as its life insurance arm, IDBI Federal and NSDL. Market reports said IDBI Federal was valued at over Rs 60 billion, so IDBI could get over Rs 28 billion for its 48 per cent stake. In case of NSDL, “According to Sebi’s (Securities and Exchange Board of India) regulation, sponsors’ (IDBI is one of the sponsors) stake should not be less than 51 per cent (currently 61 per cent) in NSDL. So, we can divest only up to 10 per cent till the regulation is not amended,” said G M Yadwadkar, deputy managing director, IDBI Bank.
“The bank has received bids for its 7 per cent stake in NSDL and is likely to be finalised by June 2018,” said Yadwadkar.
He also expects the IDBI-Federal stake sale to be completed by June 2018. These moves should help garner an estimated Rs 30-35 billion.
Yet, market experts are sceptical because of absence of credit growth and high bad loans. “The developments (recap and asset sale) will help IDBI to survive. But, its net NPAs are much more than its net worth. Therefore, it’s still a long way to go before investors make money from the stock,” said G Chokkalingam, founder and managing director, Equinomics Research and Advisory.
Not surprising then, rallies in the counter are seeing selling at higher levels.