Sidbi Valuation Lowered, Banks Still Chary

SBI Capital Markets, the merchant banking arm of the State Bank of India, has toned down the valuation of Small Industries Development Bank of India (Sidbi).

However, despite this, banks are not willing to lap up the Sidbi stake.

The finance ministry has called a meeting of senior bankers next week to thrash out the problems and ensure a smooth passage for Sidbi divestment.

SBI Caps which had earlier determined the value of Sidbi share at Rs 50 has cut it down to 48. Despite that no bank is willing to pick up stakes in Sidbi.

"No financial intermediary is willing to touch the Sidbi shares even at Rs 48. This is not a realistic pricing," said a banker under condition of anonymity.

 

In the new valuation report, SBI Caps has projected two scenarios:

no change in the existing capital structure and conversion of equity shares of face value of Rs 200 crore into preference shares along with a public issue of Rs 20 crore equity shares of Rs 10 each at a premium of Rs 40 per share to be made in 2004 which would increase the paid up capital to Rs 450 crore.

The preference shares would be redeemable after three years and carry a dividend of 13 per cent. Under the first scenario, when there would be no change in the equity capital, an offer for sale by the existing shareholders could be made to list the shares.

The indicate price in the first scenario has been pegged at Rs 48 and second scenario Rs 75. The revised valuation of shares should also include the future profitability of Sidbi which provided for Sidbi's investment in the proposed credit guarantee fund, venture capital fund and limited access to lower cost of funds.

The government had decided to delink Sidbi from IDBI to provide functional autonomy and operational flexibility to Sidbi.

The Sidbi Act which was amended inter alia envisages transfer of 51 per cent of IDBI's holding in SIDBI to LIC, GIC, public sector banks and other institutions owned or controlled by the Centre.

A joint meeting of IDBI, SIDBI and other eligible institutions and banks were convened by Ministry of Finance on August 21 to discuss issues related to transfer of Sidbi's shares.

In the absence of profitability projections the valuation was based on the past performance of Sidbi keeping in view the sustained growth achieved by the institution. A valuation of Rs 50 was determined per share.