Tag: stake sale

IDBI Bank board okays divesting entire 19% stake in ARCIL, BFSI News, ET BFSI

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IDBI Bank on Friday said its board has okayed a proposal to divest its entire stake of over 19 per cent in ARCIL. The decision was taken at a meeting of the board of directors on Friday.

The board has approved the proposal for sale of IDBI Bank’s entire holding of 6,23,23,800 fully paid-up equity shares constituting 19.18 per cent of the total equity share capital of Asset Reconstruction Company (India) Ltd (ARCIL), IDBI Bank said in a regulatory filing.

In June this year, IDBI Bank had invited bids from interested parties for the takeover of its stake in the asset reconstruction company.

Incorporated in 2002, ARCIL is owned by SBI, IDBI, ICICI and PNB, besides strategic foreign investors such as Avenue Indian Resurgence Pte Ltd.

Since its inception, ARCIL has resolved over Rs 78,000 crore worth of non-performing assets acquired from domestic banks and financial institutions, as per its website.



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Standard Life sells 4.99 per cent stake in HDFC Life

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Standard Life has sold 10.08 crore shares amounting to 4.99 per cent stake in HDFC Life Insurance.

The transaction took place on June 29.

“We are enclosing herewith a communication received from Standard Life (Mauritius Holdings) 2006 Limited, one of the promoters of the company, stating that they have undertaken a sale of 100,845,104 equity shares of the company (representing approximately 4.99 per cent of the total issued and paid-up equity share capital of the company) on June 29,” HDFC Life said in a regulatory filing on Thursday.

Post the transaction, Standard Life holds 7.86 crore shares amounting to 3.89 per cent stake in HDFC Life.

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Govt garners Rs 4,000 cr via 1.95% stake sale in Axis Bank, BFSI News, ET BFSI

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NEW DELHI: The government has raised about Rs 4,000 crore from sale of 1.95 per cent stake in Axis Bank held through SUUTI, DIPAM Secretary Tuhin Kanta Pandey said on Thursday.

“The OFS of Axis Bank got good response from investors with SUUTI garnering about Rs 4,000 cr (subject to reconciliation). Thanks to all for their participation,” the Department of Investment and Public Asset Management (DIPAM) secretary tweeted.

Through the two-day offer for sale (OFS), the government sold around 5.80 crore shares or 1.95 per cent stake held in Axis Bank through the Specified Undertaking of the Unit Trust of India (SUUTI) at a floor price of Rs 680 a share.

This includes a base issue size of 3.60 crore shares and a greenshoe option of over 2.20 crore shares.

At the cut off price of Rs 701 a share, the 1.95 per cent stake sale fetched around Rs 4,000 crore to the exchequer.

SUUTI held 3.45 per cent stake in Axis Bank at the end of March 2021.

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NARCL to further Govt’s agenda of disinvestment of IDBI Bank, privatisation of PSBs

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The National Asset Reconstruction Company Ltd (NARCL), currently being put together by banks and other lenders, may structurally alter the balance-sheets of banks in such a way that it will further the Government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks (PSBs).

Once chunky stressed assets are out of the books, the valuation of these banks will improve, making them more saleable, opine market experts.

This can help the government realise more value from the proposed sale of its 45.48 per cent stake in IDBI Bank to a strategic buyer as well as privatisation of two PSBs.

Ramnath Krishnan, President-Ratings & Chief Rating Officer, ICRA, observed that NARCL might structurally help with disinvestment in state-owned banks should the Government consider this in the future. “It might structurally alter the balance-sheets of certain banks, which could make them more saleable should disinvestment be an opportunity seriously considered by the Government,” Krishnan said.

Referring to IDBI Bank’s healthy provision coverage ratio (PCR), Mangesh Kulkarni, Research Analyst, Almondz Global Securities, assessed that with most of its legacy assets being provided for 100 per cent, it can straight away transfer them to NARCL. So, the path to divestment of Government’s stake in IDBI Bank and privatisation of two PSBs will be streamlined once NARCL starts operations, he added.

IBA sets the ball rolling

The Indian Banks’ Association (IBA) has set the ball rolling on NARCL with the appointment of State Bank of India’s Padmakumar M Nair as its new Chief. Nair is currently Chief General Manager with SBI’s Stressed Assets Resolution Group.

NARCL is being set up following Finance Minister Nirmala Sitharaman’s FY2022 Budget announcement that the high level of provisioning by public sector banks on their stressed assets calls for measures to clean up the bank books.

Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.50- lakh crore, are expected to be transferred to NARCL.

At a recent press meet, Rakesh Sharma, MD & CEO, IDBI Bank, said large public sector and private sector banks will be investing in NARCL, with each bank taking less than 10 per cent stake. IDBI Bank will also consider investing in the company.

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LIC holds the key in Govt’s IDBI Bank stake sale

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Will the Life Insurance Corporation of India (LIC) sell a portion of its shares in IDBI Bank, just so that the Government can complete strategic disinvestment of its stake in the Bank in FY22?

Left to its own devices, the Corporation may not want to do it.

Reason: the current market price of IDBI Bank is much lower than the price LIC paid in FY2019 to up its stake in the Bank from 10.82 per cent to 51 per cent.

Also read: LIC to sell stake in IDBI Bank to ease process of disinvestment

LIC hiked its stake in IDBI Bank in FY2019 in three tranches — at ₹61.73 per share via preferential allotment in October 2018 and ₹60.73 per share via preferential allotment in December 2018 as well as in January 2019. IDBI Bank’s shares closed at ₹36.30 apiece on BSE last Friday.

In the last 14 months or so, IDBI Bank’s market price has been lower than the price LIC paid to increase its stake in the Bank.

The state-owned life insurance behemoth invested a whopping ₹21,624 crore (of policy holders’ money) for hiking its shareholding in the Bank. So, it will definitely want a good return on this investment.

Being a public financial institution, the Corporation’s investments are under the scrutiny of lawmakers. If a sale happens below the acquisition price, it will be frowned upon by the stakeholders.

As at December-end 2020, LIC and the Government held 49.24 per cent and 45.48 per cent stake, respectively, in IDBI Bank.

Controlling stake

The Government is planning to completely divest its stake in IDBI Bank to a strategic investor. But the investor may want to hold more than 51 per cent stake (higher than LIC’s stake) in the Bank. So, the only way this can happen is if the Corporation sells a portion of its stake to the investor.

Among the synergies IDBI Bank has achieved with LIC include premium collection (which gives the Bank float money), sale of insurance products (fetches fee income), appointment of LICHFL-Financial Service Ltd (LICHFL-FSL) as corporate direct selling agent for sourcing of MSME and agriculture loans and select structured retail assets (auto, personal & education Loan).

Given that IDBI Bank is reaping the benefit of its synergy with LIC, the new investor may want to continue this mutual synergy which has created a single window for customers to avail banking and insurance services.

Wiggle room

LIC may get wiggle room to pare its stake in IDBI Bank once the Bank complies with the profitability criteria (Return on Assets/RoA) to come out of Prompt Corrective Action (PCA). The Reserve Bank of India invoked PCA against IDBI Bank in 2017 in view of high non-performing assets and negative return on assets.

Under PCA, a bank’s branch expansion is restricted and lending is narrowed to relatively less risky segments to nurse it back to health.

Also read: IDBI Bank back in black, posts ₹378-cr net profit in Q3

The Corporation may be banking on a re-rating of the Bank’s stock, once the PCA tag is withdrawn, to support the Government’s strategic disinvestment in IDBI Bank.

In a way, LIC is treading on eggshells vis-a-vis its investment in IDBI Bank.

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LIC to sell stake in IDBI Bank to ease process of disinvestment

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Life Insurance Corporation of India (LIC) has agreed to shed its shareholding in IDBI Bank, a move which will give a boost to the government to completely exit from the IDBI Bank and also ease the process of its strategic disinvestment.

However, it is for LIC to decide on the quantum of stake it would like to part with to aid this process.

As on December 30, 2020, LIC holds 49.24 per cent of stake in LIC while 45.48 per cent is with the Central Government.

A senior official told BusinessLine that LIC is ready to sell shares. The government intends to complete the process in FY21-22. Keeping that in mind, amendments have been proposed in the Finance Bill 2021. The Finance Bill will be taken up for consideration and passage during second leg of the Budget Session, starting Monday.

LIC was brought in when IDBI Bank was in trouble, but now the government thinks that phase is over. Accordingly, they now want LIC to offload its holding. Initially, LIC was hesitant, as it believed that the government had to ask the insurance major to sell stakes.

Special relaxation

Clauses 152, 153, of the Finance Bill seek to amend the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003. Once amendments are approved, The Industrial Development Bank of India Limited shall be deemed to have obtained a (Banking) license under Section 22 of Banking Regulation Act, which will be a condition precedent to disinvestment of government’s stake in the Bank resulting in receipts to government.

In an interview to BusinessLine, Financial Services Secretary Debashish Panda had said, “as a board-run organisation, LIC has its own principles to decide about investment and sale. Whatever they do, they will do it in the interest of policy holders. So, when they are going to off load their stake, it is in their realm … I think LIC would also sense that while government is also disinvesting, it also has a mandate from the insurance regulator to bring down its holding in IDBI Bank to 15 per cent over a period of time. Now, if the government is disinvesting, this means a sizeable, strategic chunk will be available to a potential investor. It could be an attractive proposition and may fetch a better price.”

LIC taking over IDBI was made possible on account of special relaxation provided by the insurance regulator, The Insurance Regulatory and Development Authority of India (IRDAI). The regulations restrict insurer’s holding at 15 per cent stake in a single firm. Also, an insurer cannot have ownership in any non-insurance company. The Reserve Bank of India does not allow non-banking entities to have more than 10 per cent stake in a bank.

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HDFC to sell 24.48 per cent stake in Good Host Spaces

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Housing Development Finance Corporation (HDFC) said it plans to sell 24.48 per cent stake in Good Host Spaces Pvt. Ltd for a cash consideration of ₹232.81 crore.

In a regulatory filing, HDFC said it has entered into a share purchase agreement for sale of 47,75,241 equity shares of ₹1 each, representing 24.48 per cent of the issued and paid-up share capital of Good Host.

The Corporation expects to complete the sale of its take in Good Host, which provides hostel services, guest house services, service apartments and leasing of property for hostel services, in four months.

As per the filing, the sale is subject to various customary adjustments as agreed between the parties, and the final sale consideration shall be calculated accordingly.

Subsequent to the above sale, Good Host would cease to be an associate company of the Corporation.

For the financial year ending on March 31, 2020, the consolidated revenue of Good Host aggregated to ₹ 112.60 crore and the balance sheet size was ₹1,765.13 crore.

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