The Indian government is considering paring its stake in IDBI Bank Ltd. through a preferential share issue, rather than a strategic sale to a single entity, in order to allow multiple investors to participate in the planned stake sale, The Economic Times reported June 5, citing unnamed government officials.
The government is reviewing options for the planned sale due to concerns over insufficient interest given the level of IDBI Bank's bad loans, one official said. Selling the shares via a preferential share issue is one option being considered.
Earlier in June, Mint reported that India's department of financial services is considering selling a 51% stake in IDBI Bank to a strategic partner for around 90 billion Indian rupees to 100 billion rupees. The report added that the government is considering merging at least four state-owned banks, including IDBI Bank, to help stem the rise in bad loans in their books.
As of the end of March, IDBI Bank's gross nonperforming assets amounted to 555.88 billion rupees, up from 447.53 billion rupees at March 31, 2017. It posted a net loss of of 56.63 billion rupees for the quarter ended March 31, compared to a net loss of 32 billion rupees in the prior-year period.
IDBI Bank's management intends to make recoveries through India's bankruptcy code and other means, in addition to selling noncore assets to raise fresh capital, the official added. The lender has said it will sell a record 213.97 billion rupees of bad loans from 30 large companies.
Given IDBI Bank's exposure to most corporate loans that are already being resolved through the bankruptcy code, adopting a structure similar to the stressed asset stabilization fund to clean its balance sheet is also feasible, another government official said.
As of June 5, US$1 was equivalent to 67.13 Indian rupees.
