Mumbai: IDBI Bank Ltd has put off a plan to immediately sell its stake in National Stock Exchange of India Ltd as the lender expects to get a higher price when the exchange sells shares to the public for the first time, said two people aware of the development.
“IDBI Bank has been in a sell mode since the start of the calendar year and they have divested more than half of what they owned in NSE in the current calendar year. Like several state-owned banks facing non-performing assets (NPA) issues, IDBI had been selling the NSE stake to shore up its balance sheet,” one of the two people cited above said, requesting anonymity as he is not authorized to speak to reporters.
IDBI Bank held a 5% stake NSE at the start of 2016, data from the exchange’s shareholding pattern shows. On 31 March, the bank said it had sold a 2% stake to Life Insurance Corp. at Rs3,900 per share, Mint reported. It sold a total of 900,000 NSE shares for Rs351 crore.
In July, IDBI Bank chief executive and managing director Kishor Kharat told The Hindu Business Line that the lender would look to completely exit NSE this financial year by selling its remaining 3% stake. “The necessity today is of capital. I cannot hold NSE at the cost of my growth,” Kharat said.
Subsequently, IDBI Bank launched a sale process for the stake in August, CNBC TV18 reported. However, it eventually sold only a 1.5% stake in Mauritius-registered entity TIMF Holdings Ltd.
“IDBI (Bank) started the last sale process at a time when the NSE Exchange was firming up its plans to go public. Given that the management said that they will look to file the DRHP (draft red herring prospectus) for the same latest by January end, buyers can see a clear liquidity event in the near future, which makes buying the stake very attractive,” said the second person cited above, also requesting anonymity.
Given that the sale of NSE shares in the private markets has seen very subdued pricing at about Rs4,000 per share, buyers can expect to get a good upside in the span of a few months, he added.
“IDBI themselves were able to sell the 1.5% stake at a price of around Rs5,100, which is higher than what they got from LIC in March. The eventual price in the IPO is expected to be higher than this,” he said.
On 23 August, NSE named Citigroup Global Markets India Pvt. Ltd, JM Financial Institutional Securities Ltd, Kotak Mahindra Capital Co. Ltd and Morgan Stanley India Co. Pvt. Ltd as global coordinators for its plan to go public.
Mint reported on 20 September that bankers for NSE’s public offering are asking investors to sell a part of their holding in the bourse’s proposed initial share sale at a price that values it at Rs45,000 crore.
This is around two-and-a-half times the level at which NSE shares last changed hands. In July, State Bank of India (SBI) sold a 5% stake in NSE to Mauritius-based Veracity Investments Ltd for Rs911 crore, valuing the exchange at Rs18,200 crore.
Given these developments, IDBI has halted the process to sell its remaining stake and decided to wait for the public listing to realize a significantly better value for its stake, said the second person cited above.
IDBI Bank declined to comment on the development.
Another state-owned lender, IFCI Ltd, too has been selling its stake in NSE to raise funds to prop up its balance sheet.
IDBI Bank had on 2 March announced a three-year turnaround plan under which the bank plans to raise Rs19,000-20,000 crore worth of equity capital before March 2019. For this, the bank said, it’ll consider options such as qualified institutional placements (QIPs) and preferential allotment to large strategic investors. About Rs6,500 crore will come from the sale of non-core assets, said Kharat in an interview. “We’re expecting to raise Rs1,200-1,500 crore by the end of this year through the sale of non-core assets,” he said.
Apart from NSE, the bank has investments in non-core assets, such as ratings agency Credit Analysis and Research Ltd and asset reconstruction firm Asset Reconstruction Co. (India) Ltd. IDBI’s turnaround plan aims to prop up the bank’s weak capital base and reduce government shareholding.
