Selling off family silver will be a key strategy for IDBI Bank in the current financial year to insulate itself from the losses. The bank has put on block four floors of Mafatlal Centre in Nariman Point as part of its ongoing strategy to sell off non-core assets to provide for bad loans. It is expecting to fetch about Rs 200 crore from the sale of this property. IDBI mutual fund and IDBI capital, which are housed in the building, will move back to the corporate office IDBI Tower at Cuffe Parade in Mumbai where the bank has about six floors vacant.
The other big asset sale will be offloading of a 30% stake in National stock exchange from (NSE) from which the bank is expecting a windfall of Rs 800 crore. But the articles of association of the NSE states that the sponsors should hold 51% stake. The sponsors including IDBI Bank holds 61% stake in NSE. IDBI Bank owns 30% of this which it will offload once SEBI gives the nod to sell sponsor's shareholding.
A senior bank official said, "Sebi is expected clear this sale after it gives some clarification on sponsors holding shares. Out of the 10%, we have already found bidders for 7% stake."
The other cost cutting measures initiated by the bank include shifting 400 of its branches to less expensive locations or reduce size to save on costs. It has also reduced its contract marketing staff by about 500 as it has scaled down lending operations. The bank will also shut down 55 branches and also streamline its ATMs as it shrinks its balance sheet.
The bank is also looking at selling stake in its mutual fund subsidiary where it holds 67% with the remaining 33% stake held by IDBI Caps. The bank is looking to sell its entire holding in IDBI Caps to a strategic investor with some management control. The bank is yet to decide on its stake sale plans and cede management control of the mutual fund business.
The 48% stake that IDBI Bank holds in IDBI Federal Life, a joint venture between IDBI Bank and Federal Bank with Belgium-based Ageas SA/NV as the foreign partner, will be another asset sale during the financial year where the bank has received a few bids. Federal Bank and Belgian life insurer Ageas hold 26% each in the joint venture.
But selling family silver and capital infusion has failed to rescue IDBI Bank, which has posted losses for the second consecutive year. For the financial year 2017-18, IDBI's losses widened to Rs 8,237.92 crore from Rs 5,158.14 crore reported in the preceding financial year.
During the last financial year, the bank received Rs 4,408 crore from the asset sales and Rs 4,590 crore as capital infusion from the government, besides Rs 394 crore from stake sale to LIC. The bank sold off its plush building in BKC for Rs 955 crore, sold off stakes in CCIL, SIDBI to get cash which was used as provisions for bad loans. The provisions for bad loans during the year jumped to Rs 19,126 crore in 217-18 from Rs 11,769.13 crore in the preceeding financial year.
The gross NPAs were Rs 55,588 crore, of this it wants to sell off loans worth Rs 21,397 crore. During the quarter the bank wrote off loans worth Rs 4,900 crore.
Despite a tax write back of Rs 2,519 crore and windfall gains, total income of the bank has come down to Rs 300035.41 crore from Rs 31,799.20 crore in the preceding year. The operating expenses were down to Rs 4,744.69 crore but it was primarily due to reduced employee expenses. The other expenses was marginally higher at Rs 2,950 crore, higher than Rs 2,915.58 crore in the preceding financial year.
REVIVAL STRATEGY
- IDBI Bank expects a windfall of Rs 800 crore from a stake sale in NSE
- Cost cutting measures by the bank includes shifting 400 of its branches to less expensive locations or reduce size to save on costs
- Selling of family silver has not helped the bank rescue itself from the losses for a second consecutive year.
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