IDBI Bank Rallies 10% on Buzz of Strategic Stake Sale

Shares of IDBI Bank surged over 10 per cent to Rs 95.1 after Economic Times newspaper quoting sources reported that the government is planning to sell 15 per cent stake in the lender to International Finance Corporation (IFC), a unit of World Bank.

The government currently holds a 76.5 per cent stake in IDBI Bank. The report said that the stake sale in IDBI Bank could be through a fresh issue that will infuse more capital into the lender, a stake sale by the government or a combination of both.

The report further said that the government is looking to lower its stake in IDBI Bank to 49 per cent.

IDBI Bank came into existence, with Parliament passing the IDBI Repeal Act in 2003. In terms of provisions of the Repeal Act, IDBI has been functioning as a bank in addition to its earlier role of a financial institution. Analysts feel that since IDBI Bank is not a nationalised bank, there is some operational freedom for the government as far as stake dilution is concerned.

Finance minister Arun Jaitley had earlier hinted about a change in the characteristics of IDBI Bank where government would have a majority stake, but at the same time maintain an arm's length distance. Citing the example of Axis Bank, he had wondered if IDBI Bank can follow that model.

Including today's gain, shares of IDBI Bank have rallied over 80 per cent from their 52-week lows of Rs 52.30 in August.

The government indirectly controls 29.19 per cent in Axis Bank through the administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), the Life Insurance Corporation and four other public sector general insurance companies.

At 1.47 p.m., IDBI Bank shares were up 9 per cent at 94.25, as compared to a flat Nifty. (With Agency Inputs)