Tag: stake

Mahindra & Mahindra Financial Services extends date of investment in Sri Lankan finance co by 6 months

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Mahindra & Mahindra Financial Services (MMFS) has extended the date of investment of the third and final tranche for acquisition of shares of Sri Lanka-based Ideal Finance from its existing shareholders to September 30, 2021.

“Due to the Covid-19 pandemic which has disrupted the business environment in both India and Sri Lanka, the Parties have mutually agreed to extend the date of completion of the aforesaid acquisition of shares with an intention to complete the same, latest by 30th September, 2021 (from March-end 2021), subject to necessary regulatory approvals,” MMFS said in a regulatory filing. Accordingly, the Parties will shortly be executing an addendum to the Agreement in this regard, it added.

Agreement

MMFS had executed a “Share Subscription, Share Purchase and Shareholders’ Agreement” on August 20, 2019 with Ideal Finance and its existing Shareholders (the Company, Ideal Finance & its shareholders together referred as “Parties”) to subscribe/ acquire up to 58.20 per cent of the Equity Share Capital of Ideal Finance, in one or more tranches, for an amount not exceeding Sri Lankan Rupee 200.30 crore by March 2021.

Pursuant to the aforesaid Agreement, the Company, as on date, has acquired 38.20 per cent of the Equity Share Capital of Ideal Finance and the third and final tranche for acquisition of shares from existing investors was due by March 31, 2021. MMFS said it has received the requisite approval from the Reserve Bank of India, for the proposed investment in Ideal Finance.

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Bank unions term Govt’s move to divest stake in IDBI Bank as retrograde

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Bank unions said the Cabinet approval for strategic disinvestment of the Government’s stake in IDBI Bank and transfer of management control to a strategic buyer is a retrograde step.

“The decision to disinvest in a depressing scenario would lead to underselling and passing the benefits to the private investors. It may also lead to whitewashing the bad loans from the balance sheet,” said S Nagarajan, General Secretary, All India Bank Officers’ Association (AIBOA), in a letter to the President of India, Prime Minister, RBI Governor, and Chiefs of IDBI Bank and LIC.

Staff rationalisation fears

Nagarajan feared that the profit greed of investors will lead to closure of branches/offices, restrict banking activities, lead to staff rationalisation and adverse staff service conditions, which will be counter-productive to the entire workforce.

“When the nation is reeling under health emergency, such an announcement emerging from the corridors of power is really shocking and disturbing,” he said. Nagarajan emphasised that IDBI Bank recently turned the corner after lots of effort put-in by the workforce coupled with the management’s approach to hive-off certain ancillary activities.

“The structural change brought-in by the Government through conversion of IDBI (a development financial institution/DFI) into IDBI Bank (a universal bank) in 2004 was certainly a mistaken step. …the Government’s decision to sell its stake in IDBI Bank is certainly a retrograde step… Side by side, the Government promoting an Infra Bank with huge capital is certainly intriguing,” Nagarajan said.

Appeal to the President

The Association appealed to the President, who is the Custodian of public sector undertakings and public wealth, to counsel the authorities to halt the move to disinvest the Government’s and LIC’s stake in the bank.

In addition, AIBOA sought an immediate intervention to initiate steps to recover the bad loans (at ₹36,212 crore as at March-end 2021) in a fast-track manner lest corporate defaulters acquire this great time-tested institution.

CH Venkatachalam, General Secretary, All India Bank Employees’ Association, said: “IDBI played a leading role in financing industrial development in our country. Because some private corporate houses have cheated the Bank by not repaying the loans, IDBI Bank came into problem.”

IDBI Bank’s shares on Thursday ended 6.72 per cent higher at ₹40.50 apiece. During the day, the bank’s shares rose almost 15 per cent to ₹43.50.

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Banks coming together for new umbrella entity for retail payments

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Two leading private sector lenders HDFC Bank and Kotak Mahindra Bank seem to be readying plans for a new pan-India umbrella entity (PUE) licence for retail payments.

HDFC Bank late on Thursday night said it has executed an agreement for subscribing to 4,995 equity shares of the face value of ₹10 each fully paid up issued by Ferbine Private Limited for a consideration of ₹10 per equity share.

“Post investment, bank will hold 9.99 per cent of the equity shareholding of Ferbine,” it said in a regulatory filing. The acquisition for cash consideration of ₹49,950 will be completed by February end, HDFC Bank said.

Umbrella entity for retail payments could see robust response

Earlier in the evening, Kotak Mahindra Bank too had said it picked up 9.99 per cent stake in Ferbine.

Promoted by Tata Sons Private Ltd, Ferbine was incorporated on January 18, 2021, to make an application to RBI for the PUE licence.

“The main business of the company would be to operating a pan-India umbrella entity for retail payment systems, as would be allowed/licensed by RBI, subject to approval of the PUE application,” Kotak Mahindra Bank said in the filing.

Retail payment systems: RBI opens doors to private sector

The acquisition in Febrine Private Limited by Kotak Mahindra Bank is likely to be completed on or prior to February 26, 2021.

“It may be noted that the Bank may participate in future capital raise by Ferbine,” the bank said.

RBI deadline

The announcement comes just ahead of the RBI deadline for accepting applications for umbrella entity for retail payments by February 26, 2021.

Earlier, So Hum Bharat Digital Payments had announced that it is in talks with private sector lender YES Bank for a 9.99 per cent equity investment and will work together on the proposed new umbrella entity.

Other banks, including State Bank of India, are also understood to be evaluating and applying to the RBI under the guidelines.

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HDFC Bank to pick up 9.99% stake in Ferbine

Banking & Finance

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HDFC Bank on Thursday said it executed an agreement for subscribing to 4,995 equity shares of the face value of ₹10 each fully paid up issued by Ferbine Private Limited for a consideration of ₹10 per equity share.

“Post investment, bank will hold 9.99 per cent of the equity shareholding of Ferbine,” it said in a regulatory filing.

The acquisition for cash consideration of ₹49,950 will be completed by February end, HDFC Bank said.

Kotak Mahindra Bank picks up 9.99% stake in Ferbine Private Ltd

Earlier in the evening, Kotak Mahindra Bank too said it has picked up 9.99 per cent stake in Ferbine.

Promoted by Tata Sons Private Ltd, Ferbine was incorporated on January 18, 2021, to make an application to RBI for the PUE (pan-India umbrella entity) licence.

For Tatas, Chandra’s 5th year at the helm may be best yet

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

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IDBI Bank reported a net profit of ₹378 crore in the third quarter ended December 31, 2020 against a net loss of ₹5,763 crore in the year ago period.

The bottomline was buoyed by a 89 per cent year-on-year (yoy) decline in provisions for bad loans, ₹ 105 crore write-back in provisions for depreciation in investments and ₹ 323 crore profit the Bank booked by selling a portion of its stake in its life insurance joint venture.

Net interest income (difference between interest earned and interest expended) was up 18 per cent yoy at ₹ 1,810 crore (₹ 1,532 crore in the year ago period).

Other income, including income activities such as commission, fees, earnings from foreign exchange and derivative transactions, profit and loss from sale of investments and recoveries from written off accounts, increased 7 per cent yoy to ₹1,368 crore (₹ 1,279 crore).

Bad loans

Gross non-performing assets (GNPAs) declined to ₹ 3,532 crore during the reporting quarter.

GNPAs declined to 23.52 per cent of gross advances as at December-end 2020 against 25.08 per cent as at September-end 2020.

Net NPAs declined to 1.94 per cent of net advances as at December-end 2020 against 2.67 per cent as at September-end 2020.

With proforma slippages (adjusted for the Supreme Court’s interim order), Gross and Net NPA ratio would have been 24.33 per cent and 2.75 per cent, respectively.

A break-up of the provisions shows that provisions towards NPAs and bad debts written-off declined to ₹ 49 crore (₹ 440 crore) and ₹ 208 crore (₹ 332 crore), respectively.

However, provisions towards standard assets rose to ₹624 crore (₹ 68 crore).

In its notes to accounts, the Bank said it has made additional provision of ₹ 941 crore over and above the IRAC/ income recognition and asset classification norms (includes shifting of ICA/ Inter-Creditor Agreement provision of ₹ 395 crore to IRAC provision) in respect of certain borrower accounts in view of the inherent risk and uncertainty of recovery in these identified accounts.

Global gross advances were down 7 per cent yoy to stand at ₹ 1,59,663 crore. This was mainly due to 18 per cent yoy decline in corporate advances. Retail advances edged up 1 per cent.

Total deposits increased about 3 per cent yoy to ₹ 2,24,399 crore. The share of low-cost of current account, savings account (CASA) in total deposits improved to 48.97 per cent from 47.65 per cent in the year ago quarter.

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