On April 12, IBL recorded its maiden quote of Rs 17, though the trading volume was thin at just 1,900 shares in two transactions. On the following day, after opening at Rs 17, IBL sought lower levels to end the day at Rs 15. The volume of trading was, however, better with 28,600 shares changing hands in 17 trades.

On April 15, IBL lost further value to Rs 14.50 in a falling market caused by the sudden political developments. Not surprisingly, the market witnessed a solitary trade for 500 shares that day.

On the basis of IBL's latest price, investors in the infant bank have lost almost one-fifth (19 per cent) of their investment value. More importantly, when one considers the fact that IBL'smid-sized public offer managed to scrape through only by the skin of its teeth, the future outlook for the scrip does not infuse much confidence. A sizeble portion of forced subscriptions, which inevitably form part of such poorly received issues, usually seek the earliest exit even at the cost of some capital loss.

Should this phenomenon extend to IBL too, a further downslide in its market valuation cannot be ruled out. It may be recalled that IBL accessed the primary market in February this year with an issue of 4 crore equity shares at a premium of Rs 8 per share aggregating to Rs 72 crore. The issue closed on February 16. The IBL scrip has commenced trading on BSE after a 55-day wait from the issue closure. IBL had promised at the time of its issue that besides BSE, its shares would be listed on the Madhya Pradesh Stock Exchange (MPSE) at Indore and NSE.

Incidentally, for the Indore-headquartered IBL, MPSE is the regional stock exchange. While it is not known whether the scrip has commenced tradingat MPSE, IBL debuted on NSE on April 15 in the midst of extreme political instability. The scrip, after opening at Rs 14.30, briefly ruled higher at Rs 15.90 before declining to end the day at Rs 14.40. The opening day witnessed 24 transactions for 6,200 shares.

IBL's public offer had earmarked 4 lakh shares for its employees and another 40 lakh shares for preferential allotment to IDBI's shareholders. The net offer to the public thus worked out to 356 lakh shares. As it turned out, almost all the 400-odd employees of the bank chipped in with their participation in the quota meant for them, resulting in a subscription of 0.95 times.

As for IDBI shareholders, while the smaller investors were wary about investing in IBL, collectively bidding for only 8.52 lakh shares, a countable number of large investors, believed to be institutions, appear to have come to IBL's rescue. Out of the 39 applications for 53.94 lakh shares in this category, 10 applications alone accounted for 53.33 lakh shares or about 99 percent of the total bidding. Thanks to this `institutional' interest, the quota for IDBI shareholders recorded an overall subscription of 1.56 times.

As far as the public portion is concerned, IBL received 21,870 applications for a cumulative 374.86 lakh shares as against the 356.22 lakh shares for which bids were invited, resulting in the issue getting oversubscribed by a marginal 5 per cent. However, on closer scrutiny, large investors appear to have once again saved some blushes for IBL.

In the small investors' category (individuals up to 1,000 shares), IBL received 21,174 bids for a cumulative 71.20 lakh shares resulting in this component recording an undersubscription of 60 per cent. In contrast, in the bulk investors' category, 696 applicants bid for a cumulative 303.66 lakh shares, thereby ensuring oversubscription of this component by about 70 per cent. Nonetheless, the feeling that the issue appears to have been stage-managed is evidenced by the presence of a handful of huge applications at thetop end of the bulk spectrum. In fact, just 58 applications for the IBL issue accounted for a phenomenal 266.68 lakh shares of which just 6 applicants bid for a mind-boggling 133.94 lakh shares!

To put matters in perspective, just 63 bids for all the categories of the IBL issue accounted for a whopping 313.68 lakh shares, or 71 per cent of the total subscription, while 24,646 applicants brought up the rear with a cumulative bid of 127.41 lakh shares, or only 29 per cent.

Operationally, IBL has had a chequered growth. In about four years of existence, it managed to net a deposit of about Rs 2,515 crore. Notwithstanding the robust deposit mobilisation, the advances portfolio could only grow to Rs 900 crore in the same period. Though the economic slowdown and the consequent poor credit offtake are to blame for the sluggish advances growth, IBL appears to have overindulged on the investments front.

At the end of September 1998, IBL's investments exceeded 50 per cent of its total deposits. When the demandfor credit picks up and the interest rates harden in future, IBL will have to contend with steep depreciation in its investment portfolio.

On the non-performing assets (NPAs) front, though the bank has prided itself on the low (0.32 per cent) NPA level, it is difficult to concede the point for many reasons. First, the bank has had a very recent origin. Second, IBL's advances growth so far has been modest.

Third, the NPA guidelines inflict damage on the bottomline only as the problem advances with age. Over the years, IBL's interest spread on average working funds (AWFs) has been on the downslide, dipping to 2.39 per cent in fiscal 1998. However, thanks to the containment of the operating expenses, the net profit as a percentage of AWF witnessed a steady growth to 1.07 per cent by fiscal 1998.

Just the same, IBL's bottomline of Rs 20.05 crore for the year translated into an earnings per share (EPS) of only Rs 2. For the current fiscal, IBL has projected a net profit of Rs 26.13 crore which, ifachieved, would mean a fully diluted EPS of Rs 1.87. IBL's market quotation discounts the projected EPS about 8 times.

According to marketmen, IBL resembles UTI Bank Ltd (UBL) in many respects. IDBI is the promoter of UTI. While IDBI has promoted IBL, UBL has been UTI's creation. Though UBL issued its equity at a higher premium of Rs 11 a share, the scrip presently languishes at a poor Rs 13, which translates into a PE factor of about 10. Thus, the portents are evident that IBL's price line is more likely to follow that of UBL rather than the high profile HDFC Bank, which has been on the uptick in recent times due to the widely-speculated entry of NatWest Bank which, obviously, is not good news for IBL's shareholders.

(Arranged by Investar -- The Aarthik News & Research Syndicate)