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IDBI Bank targets 18% recovery from ₹4,000 crore distressed assets

Published Nov 20, 2023 09:26AM ET
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MUMBAI - IDBI Bank is embarking on a significant asset liquidation process with the help of EY India, aiming to recover up to 18% from a distressed assets portfolio valued at ₹4,000 crore. This move is part of a broader strategy as the bank prepares for the divestment of stakes by its major shareholders, the government and LIC, which together hold a 60.7% share in the bank.

The sale involves a diverse range of debtors, including Daewoo Motors, Malvika Steel, Mardia Chemicals, Modi Rubbers, and Precision Fasteners, among 631 accounts. The process is overseen by EY India as the process adviser and is expected to be completed within six and a half months. This effort is in line with the conclusion of the Stressed Assets Stabilization Fund's (SASF) mandate. SASF was established when IDBI transitioned to a full-fledged banking entity and took over ₹9,000 crore worth of stressed loans backed by an equivalent amount in zero-coupon government bonds.

Over the years, SASF has been incrementally repaying these loans through loan recoveries, which also facilitated the redemption of the government bonds. Cyril Amarchand Mangaldas provides legal counsel during this final phase of asset liquidation initiated in 2004. As SASF nears the end of its twenty-year lifespan, it aims to maximize recoveries from its remaining non-performing investments on IDBI's balance sheet.

This asset sale coincides with plans by Life Insurance Corporation of India (LIC) and the Indian government to divest their stakes in IDBI Bank. The bank's leadership under Chairman CS Setty and trustees like Sunil Mehta are managing this concluding phase to streamline IDBI's balance sheet and pave the way for stakeholder divestment.

InvestingPro Insights

As IDBI Bank embarks on this significant asset liquidation process, real-time data from InvestingPro can help shed light on the bank's financial standing. The bank has a market capitalization of 7982.83M USD and a P/E ratio of 13.98, indicating a relatively low price-to-earnings ratio compared to near-term earnings growth. Moreover, the bank has witnessed a revenue growth of 31.35% over the last twelve months as of Q2 2024.

InvestingPro Tips provide additional insights. IDBI Bank has seen accelerating revenue growth and consistently increasing earnings per share. Nevertheless, the bank is quickly burning through cash, and poor earnings and cash flow may force dividend cuts. This aligns with the bank's current move towards asset liquidation and stakeholder divestment.

InvestingPro offers a wealth of additional tips for subscribers, currently on a special Black Friday sale with a discount of up to 55%. With these insights, you can make informed decisions about your investments.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

IDBI Bank targets 18% recovery from ₹4,000 crore distressed assets

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