IDBI's 30% stake sale in NSDL delayed; transaction may spill over to FY19

IDBI Bank’s sale of a 30 per cent stake in National Securities Depository (NSDL) has been delayed and any gains will accrue only in the next financial year (FY19). 

While it finalised the sale of a 7 per cent stake in December 2017, the Mumbai-based public sector lender was still working on completing process work for the deal, banking sources said. As for the balance 23 per cent, it was difficult to get investors or institutional investors, pushing sale to the first quarter of the next financial year.

The bank’s executives confirmed they were facing challenges in attracting investors for the 23 per cent stake. But they declined to elaborate on the stage at which the process stood now.

In October 2017, capital-starved IDBI Bank had informed it was selling its entire 30 per cent stake in NSDL as part of its plans to monetise non-core investments to raise resources. 

NSDL is promoted by IDBI Bank, the National Stock Exchange (NSE), and the Specified Undertaking of the Unit Trust of India (SUUTI). The public sector lender had roped in ICICI Securities to advise and manage the process of divestment.

NSDL was established in August 1996 and has developed infrastructure of international standards since. It handles most of the securities held and settled in dematerialised form in the Indian capital market. 

NSDL, on a consolidated basis, reported a net profit of Rs 999.8 million on total income of Rs 2.52 billion in 2016-17. Its net profit stood at Rs 974 million on total income of Rs 1.85 billion the previous year, according to data on NSDL website.

IDBI Bank has been selling non-core investments through 2017-18. It raised over Rs 11 billion by selling its entire 30 per cent stake in NSDL e-Governance Infrastructure (NEGIL) to IIFL Wealth Management on February 15.

Banking sources said the seller had received three bids, with IIFL Wealth bidding the highest. The NSE was one of other bidders. 

The lender had raised around Rs 21 billion through sale of non-core assets in April-December 2017. NEGIL is promoted by IDBI Bank, NSE Strategic Investment Corporation and SUUTI. State Bank of India (SBI), Oriental Bank of Commerce, HDFC Bank, Axis Bank, Deutsche Bank, Union Bank of India, HSBC, Standard Chartered Bank, Dena Bank, and Canara Bank are shareholders.

The bank has already sold a 5 per cent stake in the Clearing Corporation of India (CCIL) and a sizeable stake in the Small Industries Development Bank of India (Sidbi). 

In February 2018, global rating agency Moody’s upgraded the outlook on IDBI Bank to “positive” from “stable” on expectation of improvement in capital position and stabilisation of asset quality.

The positive outlook reflects the upward pressure that could develop on the bank's long-term rating. This could happen if credit fundamentals — namely the capital position — continues to improve over the next 12-18 months due to capital infusions from the Indian government.