In 1995 IDBI the DFI came out with an IPO at Rs 130.I had given it the notorious sobriquet ‘Instant Death By Investment !’ as the Pricing was way to High.The IPO was bailed out by UTI at the time in a quid quo pro really as then IDBI subscribed to Unit 64 at the high purchase price which was a scam in itself as it was 60% higher than the actual Unit 64 NAV which hovered around par of Rs 10 !
Then in 2004 IDBI the DFI merged with IDBI Bank and in 2010 I had recommended it at Rs 130 in 2010 for several reasons.It did climb past Rs 200 the same year but then disappointed and started it’s downward slide as NPA Demons begin surfacing big time.
Last Month in the second week of February these NPA Demons caused the Share Price to drop below Rs 50
On February 29,2016 our FM made this specific budget phraseology for IDBI :
“The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake to below 50 per cent”
It was a no brainer for the Share Price to begin rising the same day from Rs 58 levels to cross Rs 60
It’s now moved up @ Rs 68
Here’s the Share Price Trend of IDBI Bank from 2004 to 2016 (in Rs)
Year
Open
High
Low
Close
2004
62.90
115.00
29.25
109.80
2005
110.95
130.95
76.30
97.15
2006
98.15
110.00
48.50
76.30
2007
76.80
181.00
66.50
165.30
2008
166.50
180.30
53.00
67.65
2009
68.00
140.00
39.75
127.45
2010
128.00
202.25
105.85
164.75
2011
165.75
168.30
77.40
77.80
2012
78.30
121.50
77.15
111.40
2013
112.10
118.20
52.30
66.45
2014
66.85
116.50
52.95
73.15
2015
73.25
95.70
52.45
87.80
2016
90.80
91.15
47.40
68.85
The Book Value of IDBI Bank is over Rs 110 giving the relative Valuation of 0.6….that’s of course one accepts current audited GPA levels of Rs 19615 crs ,that’s 8.94% of Advances and with a 62.92 % of Provision Coverage
Government owns 80.16% of IDBI Bank and if it is open to bring this down below 50% as proclaimed in the Budget by our FM then it begs the question ~ Will they just bring it down but yet retain Management Control or will IDBI really be up for Privatisation and therefore up for Sale ! ?
Quickly the IDBI Employees have voiced their displeasure and threatened to go on strike in the crucial last week of this month of March 2016 which closes out FY 16
Why would the IDBI Employees resist Privatisation or Government diluting it’s stake below 50!?
Seriously ask yourself this ! I reflected and immediately came up two big reasons in my view :
Insecurity of Jobs ~ This is understandable as Employees have huge job security under the Government ~ Bank can Hire but not Fire ~ at best Government can try VRS as they’ve been doing over the years in PSU Banks ~ Connect this with how bloated Government Enterprises really are on workforce be it the Railways or Coal India
Accountability & Transparency in Operations ~ This would open a Pandora’s Box in the Bank for all the NPAs & who really is responsible in the Bank to have advanced Loans that have turned Bad.Of the over Rs 2 lakh crores advances ,the Bank reportedly has an exposure of Rs 7000 crs to the JaiPrakash Group,Rs 15000 crs to the Essar Group and @ Rs 925 crs to Kingfisher Airlines.In fact the ED is investigating Vijay Mallya & his Kingfisher Airlines for Siphoning off @ Rs 300 crs Funds from the Rs 900+ crs IDBI Loan
So will our Government be influenced by the IDBI Employees opposition & not go ahead with it’s plans to sell it’s stake in IDBI Bank to bring it below 50% ?…the Budget already shows FY 17 Disinvestment Target of Rs 36000 crs + Precise Strategic Disinvestment of Rs 20500 crs.This would include IDBI Bank Stake Sale plannedread more
