Government has given its go-ahead to IDBI Bank to raise Rs 3,771 crore during the year, by way of Qualified Institutional Placement (QIP), a move which will dilute its holding in the state-owned lender.
The government, according to the bank’s regulatory filing, has “conveyed its approval to IDBI Bank to raise capital to the tune of Rs 3,771 crore, through QIP route, at an appropriate time during the year”. It said the go-ahead for raising the fund was given to it through a letter yesterday.
At the current maket valuation Rs 3,771 crore represents about 26.45 per cent share of IDBI Bank. The government holding in the bank stands at 80.16 per cent.
As per the existing norms, government equity in a public sector bank cannot go below 52 per cent to maintain the public sector character of state-owned banks.
“The Public Sector Banks, including IDBI Bank have been allowed to raise capital from public markets through follow on public offer (FPO) or Qualified Institutional Placement (QIP) by diluting Government of India holding up to 52 per cent in a phased manner based on their capital requirement, their stock performance, liquidity, market conditions...” the government had informed Parliament earlier this month.
Meanwhile the bank in another filing said it has raised Rs 1,000 crore today through bonds (Tier 2) on private placement basis to strengthen bank’s capital adequacy.
“The entire issue has been subscribed by Employees’ Provident Fund Organisation,” it said. The bonds will be listed on NSE and BSE.
Finance Minister Arun Jaitley had earlier indicated a change in the characteristics of IDBI Bank where government would have a majority stake, but at the same time maintain an arm’s length distance.
Citing the example of Axis Bank, he had wondered if IDBI Bank can follow that model.
The government indirectly controls 29.19 per cent in Axis Bank through the administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), the Life Insurance Corp and four other public sector general insurance companies.
On December 29, the IDBI Bank today said the government has infused Rs 2,229 crore into the bank in lieu of preferential allotment of shares.
The government, in August, had announced capital infusion of Rs 20,088 crore in 13 public sector banks that include PNB, SBI, IDBI, Bank of Baroda and Canara Bank.
IDBI Bank’s net profit remained almost flat at Rs 119.5 crore for the second quarter ended September 30.