The Stock Holding Corporation of India Ltd (SCHIL) will merge with IDBI Bank Ltd, with the latter buying out over a half-a-dozen other public sector shareholders.
The Stock Holding Corporation of India Ltd (SCHIL) will merge with IDBI Bank Ltd, with the latter buying out over a half-a-dozen other public sector shareholders.
IDBI will give them IDBI shares equal to the value of their stake in SHCIL, according to a statement from the bank.
While valuations were not discussed, IFCI had bought out a 17% stake in the company from ICICI Bank for around Rs300 crore last year, valuing the company at Rs1,800 crore.
IDBI currently holds 18.95% stake in the company. At similar valuations, it would have to shell out close to Rs1,400 crore to buy out the other shareholders.
Besides IFCI, which holds 33.91% stake in the company, the other major stakeholders are the Life Insurance Corporation of India and the Administrator of the Specified Undertaking of the Unit Trust of India which hold 14.97% and 16.96%, respectively.
The deal, which would be subject to regulatory and shareholder approvals, is expected to be completed by March 31, 2013, said the bank’s statement.
IDBI’s board of directors gave an in-principle approval to the deal at its meeting held on October 30, 2012.
SHCIL was established in 1986 and was promoted by IDBI, along with six other public financial & investment institutions of the country. The company is a financial services firm which provides custodial, depository and broking services.
The company operates through a network of 227 branches with around 1,300 employees.
The merger would add to the bank’s retail operations with a 20% increase in its 1,000-strong branch network.
Among other gains, the merger would also help the bank “enhance its presence in third party distribution of financial products and gain entry into custody services”, according to a statement.
The only business which wouldn’t be a part of the bank would be stock broking, stated B K Batra, deputy managing director, IDBI Bank.
“Other than broking, all other activities are permissible. That business will be merged with IDBI Capital Market Services,” he said. The backing of a bank is positive for SHCIL’s custodian business, according to one ex-employee of SHCIL.
“It would be easier to gain clients since they tend to be more comfortable with a custodian integrated with a bank,” he said.
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