The spat between Industrial Development Bank of India (IDBI) and its subsidiary IDBI Bank is over.
IDBI chairman P P Vora has allowed the bank to go scouting for a partner with which it can place 26 per cent stake.
Even though he has not formally said that the IDBI is ready to sign a no-merger covenant with the bank to comfort the prospective partner, indications are clear that he would do so once the partner is identified.
What more, IDBI brass is set to join IDBI Bank officials in scouting for the partner.
The belief that IDBI is no longer on a path of confrontation with the bank gets further strengthened by the fact that IDBI Bank chairman M S Verma has been given an year's extension.
IDBI has also approached the Reserve Bank of India for a extension in time for diluting its stake in its subsidiary, IDBI Bank. The deadline for dilution of stake expires on March 31.
IDBI is expected to offload 26 per cent of its stake through a preferential allotment with foreign institutional investors (FIIs) in the first quarter of the next fiscal.
The plan is to rope in only a private equity investor and not a bank. The bank had earlier given the mandate for scouting for potential investors to DSP Merrill Lynch.
IDBI's stake in IDBI Bank is at present at around 57 per cent with Sidbi holding another 14 per cent stake.
The RBI had earlier decided against relaxing the timeframe for bringing down the promoter's stake in new private sector bank. It had told the promoters to bring down their stakes to 40 per cent before the end of the current fiscal.
The preferential allotment will help the bank in shoring up its capital adequacy ratio which is currently near to the 9 per cent mark and also go in for a massive expansion plan.
Earlier, the financial institution at its board meeting held on January 29 had decided against signing a no-merger covenant with the prospective strategic partner with the bank, thereby blocking any move by the bank to offer stakes to a strategic partner or a private equity participant. IDBI may sign the no-merger pact once it finalises its route for universal banking.
