Right Time to Monetise: IDBI Bank Receives Approval To Divest Stake in CARE
Right Time to Monetise: IDBI Bank Receives Approval To Divest Stake in CARE
IDBI or Industrial Development Bank of India has recently been given approval from the Board of Directors for divesting the stake in Credit Analysis and Research (CARE).
Bank Given Permission To Sell Shareholding
The bank has now made the decision to sell its shareholding of 48,18,292 shares in CARE in either part or whole, in accordance with compliance with important applicable laws, as well as rules, regulations and guidelines. Proposed sale of shares will be made in one or more tranches as per IDBI’s statement to BSE.
Key shareholders in CARE include Canara Bank, SBI, Bajaj Holdings and IL&FS. IDBI is said to be in talks with PE players as well as financial institutions to sell the stake, as per media reports. Baring PE Asia and Blackstone have been identified as most likely to bid for the CARE stake.
Formal bidding for the stake sale will commence by January 2015. The process will occur via a closed bidding process, in all probability as per media reports. Based on current market price, IDBI Bank will notch up INR 684 crore through sale of the entire stake in CARE.
Timing Is Right
B. K. Batra, the ED and Group Head at Corporate Banking in IDBI Bank has been quoted as saying that this is the right time to monetise part or entirety of the stake in CARE. The bank can obtain between INR 600 to 700 for the entire shareholding. IDBI Bank is only checking out CARE and NSE stake sales at this time.
Nod From BOD
IDBI Bank is the single largest shareholder in CARE and it has received a nod from Board of Directors for selling the stake which is worth over INR 690 crore. Other shareholders have included Canara Bank which is the second largest shareholder with 11.95% stake and Franklin Templeton at 4.25%. Both are also looking to sell the stake.
Currently, the rating agency has invited bids for 45% sake in the company wherein principle shareholders led by state run lenders IDBI, Canara Bank and SBI along with others have been put up for sale earlier in the year. Company has only received a bid from Baring Private Equity Partners Asia, according to some media reports. Other shareholders including Aditya Birla PE and IL& FS have offloaded their stake in part as well.
In the month of February, IL&FS Financial Services sold over 3.5 lakh shares via the open market for total of INR 28.3 crores. CARE got listed on the exchange in December 2012 rating INR 540 crore and currently has a market cap of INR 4153.54 crore.
According to a statement issued by IDBI, “The board at its meeting held on 29 December 2014 has permitted the sale of IDBI Bank’s part or whole shareholding of 4,818,292 equity shares (4.82 million) in Credit Analysis and Research in one or more lots subject to compliance with all applicable laws, regulations and guidelines.” IDBI is the biggest shareholder in the ratings company and its stake in CARE is massive.
Previous Acquisitions
IDBI has been on the giving end as far as stake sales are concerned also. Consider its purchase of 100% stake in Stock Holding Corp of India Ltd. IDBI brought out its fellow shareholders in an all share deal to give the public sector lender access to 8 lakh new customers.
About CARE
CARE Ratings has commenced operations in 1993. It is the second largest credit rating agency in the country. It has a rating volume of debt equalling INR 56.99 lakh crore ( as on March 31st 2014), this company is known as a leader in the Indian capital markets. It is known for covering rating segments such as those for banks, IPO gradings and sub sovereigns. CARE provides services across an entire spectrum of credit ratings to help corporates to raise capital for various projects. It also enables investors to establish investment decisions on the basis of credit risk as well as risk-return expectations.
