IDBI, banks fail to agree over SIDBI price

SBI Caps, the merchant banker handling the deal, has been asked to make a fresh presentation giving five year projections of SIDBI to the banks by September 10.

Eleven public sector banks including State Bank of India(SBI), Corporation Bank, Canara Bank, Indian Bank, Bank of Baroda, Punjab National Bank and state-owned Life Insurance Corporation and General Insurance Corporation (GIC) participated in the meeting.

The price of Rs. 50 per share was considered too high bythe PSU banks who felt that a price of Rs. 30-35 was more realistic keeping in view the market perception about the institution, they said.

Government had announced two years back the sale of 51per cent stake in SIDBI, which has a paid-up capital of Rs. 450 crore. However, the actual process only began early this year after the IDBI Act was amended in the budget session of Parliament.

Sources said another issue which came up at the meetings the percentage of dividend projected by SBI Caps at 15 per cent. Banks said this was too low, while IDBI officials said that once banks own majority stake in SIDBI, they could decide a higher dividend.

IDBI officials said the price was expected to be finally decided around the level of Rs 35 per share. It is expected that even at a price of Rs. 25, IDBI wouldget about Rs 600 crore from the divestment, according to analysts.

The fresh presentation required to be made by SBI Caps would apart from projections for five years, also consider factors which could affect the bank’s performance.

Factors like the impact of WTO regime, the Rs. 500 crorenon-interest earning contribution being made by SIDBI to the credit guarantee scheme, the investment required to revamp State Financial Corporations (SFCs), would be taken into account, sources said.