IDBI postpones decision on offloading of SIDBI stake

Official sources said the delay was on account of other official commitments of the IDBI top brass.

At a meeting, chaired by Banking Secretary Devi Dayal on September 21, top IDBI officials had failed to reach an agreement with public sector banks and Financial institutions to offload SIDBI shares at a price of Rs. 50 per share. SBI Caps, the merchant bank handling the deal was asked to make a fresh presentation giving five year projections of SIDBI to the banks by September 10.

Eleven public 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) had participated in the meeting.

The pricing of SIDBI shares at Rs 50 was considered too high by the PSU banks which felt that a price of Rs 30-35 was more realistic keeping in view the market perception.

The government had announced sale of 51 per cent stake in SIDBI, which has a paid-up capital of Rs. 450 crore about two years back.

The actual process of offloading the 51 per cent stake 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 meeting was 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 settle for a higher dividend.

It is expected that even at Rs. 25, IDBI would get about Rs 600 crore from the sale of SIDBI shares.

IDBI officials said that they expect the final price of SIDBI to be in the range of Rs. 35 per share.

The fresh presentation required to be made by SBI Caps would include five year projections of SIDBI and take into consideration factors which could affect the bank’s performance.

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