IDBI seeks nod to raise ~50 bn

Public sector lender IDBI Bank is seeking shareholders’ nod to raise capital up to ~50 billion by issuing fresh shares through various routes, including Qualified Institutional Placement (QIP).

In notice to shareholders for its annual general meeting slated for August 13, IDBI said the resolution seeks to enable the bank to offer, issue, and allot equity shares aggregating up to ~50 billion (inclusive of premium amount).

It could tap investors through public issue, rights issue, preferential issue, private placement, or QIP. The Special Resolution passed at the last AGM held on July 18, 2017 for issue of capital under the QIP route, was valid for only one year up to July 17, 2018 for QIPs.

In a related development, the board of directors of LIC, which is set to meet on Monday, is likely to give its nod to the proposal to increase the insurer’s stake to 51 per cent in the bank.

The government owns 85.96 per cent of IDBI Bank, while LIC holds 7.98 per cent as of end-June 2018, according to filings with BSE.

The LIC board is expected to discuss a blueprint for reviving the bank and, accordingly, take a decision. LIC has done initial work for due diligence on IDBI Bank, which is under RBI’s Prompt Corrective Action (PCA) framework due to high level of non-performing assets (NPAs). Gross NPAs stood at 27.95 per cent (~555.88 billion) at the end of March 2017.

The discussion with IDBI officials for planning and reviewing existing work would be more substantive after the LIC board meeting, said an IDBI Bank executive. The bank has to maintain its Tier I capital in accordance with the relevant Regulatory guidelines issued from time to time. In view of the ongoing implementation of BASEL III norms and the consequential capital charge, there is a need to increase the capital to further strengthen the Capital Adequacy Ratio (CAR). The bank’s CAR stood at 10.41 per cent (common equity tier I of 7.42 per cent) at the end of March 2018.