IDBI Bank to fold in Gilts, HomeFinance by March

The entire process of amalgamation of IDBI Gilts and IDBI HomeFinance, the two wholly owned subsidiaries of IDBI Bank, into the parent is expected to be completed by this fiscal-end.

The board of directors of the bank, had given an in-principle approval to the proposal around three months ago, formally approved the scheme of amalgamation at a meeting held on Friday.

Now, the bank has to take approvals from the ministry of corporate affairs and other statutory and regulatory authorities.

“By March 2011 we will have all the approvals in place,” said P Sitaram, chief financial officer, IDBI Bank.

“The decision for amalgamation of IDBI Gilts was taken because it is more into primary dealership business and we felt that in a rising interest rate scenario, the survival of this subsidiary on a standalone basis may be in trouble,” said Sitaram. “Similarly, we decided to amalgamate IDBI HomeFinance also because it was set up at a time when Industrial Development Bank of India (IDBI) was not a bank. Now that it is a bank and the bank is also into disbursement of home loans, we thought of the amalgamation.”    

Analysts feel the move is positive for IDBI Bank.

“The amalgamation of HomeFinance will help IDBI Bank increase its retail portfolio on the housing loans side. But there would not be any major impact on the stock price,” said an analyst with a Mumbai-based brokerage.

On Friday, IDBI Bank’s share price ended at Rs 168.35, down 2.04% compared with Thursday’s close on the Bombay Stock Exchange.

For the quarter ended September, the bank had reported a net profit of Rs 429 crore, up 69% year on year. Deposits increased 18% to Rs 1,54,305 crore and advances by 24% to Rs 1,30,213 crore.