The Telegraph
Since 1st March, 1999
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Sidbi keeps door open for IDBI Bank

New Delhi, Dec. 25: The Small Industries Development Bank of India (Sidbi) is still keen on picking up a majority holding in IDBI Bank where it already has a 14 per cent equity stake.

“We are interested in acquiring a stake in IDBI Bank since we are co-promoters of the bank,” P.B. Nimbalkar, chairman and managing director of Sidbi, told The Telegraph. “We have given an open offer to IDBI that we will pick up stake, whenever they decide to offload.”

Sidbi's offer to pick up a majority stake had been put aside earlier for two reasons; the government was contemplating a reverse merger of the bank with its principal IDBI. Later, IDBI was in confidential talks with several other banking giants including HDFC which ultimately fizzled out.

Last month, IDBI chief P.P. Vora ruled out the option of a reverse merger with IDBI Bank. “We would like to retain our IDBI brand equity...IDBI Bank will have to take up a new name for their banking operations,” Vora had said.

Nimbalkar is now making it clear that with these counter-proposals now in the backburner, his offer remains open. Sources added that Sidbi's bid to raise stake was likely to come through soon.

IDBI Bank was promoted by Industrial Development Bank of India (IDBI) and Sidbi with an equity capital base of Rs 100 crore where Rs 80 crore was contributed by IDBI and Rs 20 crore by Sidbi.

But the bank’s paid-up capital rose to Rs 140 crore after its initial public offering (IPO) in 1999. IDBI now holds 57 per cent of the equity and Sidbi 14 per cent.

The government has recently allowed the ailing IDBI to metamorphose into a commercial bank after acquiring a banking licence by repealing the IDBI Act. As a development financial institution, IDBI had provided long-term loans to a host of companies over the years.

Over the past few years, the principle of borrowing short and lending long led to severe asset-liability mismatches that cut the ground from the financial institution which has been eager to enter the retail banking segment.

Nimbalkar said IDBI would have to offload its equity stake according to the Reserve Bank guidelines that bar cross-holding. “Probably IDBI will keep a minority stake...but they will have to cease management control.”

Nimbalkar added: “According to the RBI directive to reduce its holding to the 49 per cent mark, they were forced to look for an option which will enable them to reduce their holding from 57 per cent to 49 per cent...that was the time when we offered to pick up 12 per cent stake.”

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