IDBI scrip nosedives on poor financials, loses 2.3% on Friday

Atmadip Ray

Mumbai, Aug 3: Stock prices of the Industrial Development Bank of India (IDBI), which have been hitting record yearly-lows successively for the last few days, dipped further by 2.35 per cent on Friday to close at Rs 18.85 from its Thursday’s close of Rs 19.35 on the Bombay Stock Exchange (BSE).

Analysts with leading stock broking firms pointed out that financial health of country’s premier developmental financial institution (FI) has been deteriorating over a period of time, and that is largely reflected on its stock prices. The investors are shying away from IDBI counter as the beleaguered FI has failed to transform itself to deliver higher shareholders value.

During the first quarter of the current fiscal ended June 30, net profit of IDBI declined by 18.65 per cent to Rs 181.9 crore, down from Rs 223.6 crore during the corresponding period. Net profit during the previous fiscal also plummeted by 24.78 per cent to Rs 947 crore from Rs 1259 crore, baring the trend where the FI is headed.

“Another matter of concern for IDBI is the bail-out package for the Industrial Financial Corporation of India (IFCI), where the Centre has asked IDBI, along with other major shareholders of IFCI, to pump in funds to help IFCI out of trouble. This might lead to a payment crisis in IDBI, as the FI has already been in a dire financial straights. And this is not receive well by the shareholders”, analysts noted.

The Centre has cleared the Rs 1,000 crore bail-out package. Of this, government would contribute Rs 400 crore by way of investments in 20-year convertible debentures, with the remaining Rs 600 crore being provided by its major shareholders. It could be pertinent to note that IDBI is the largest stakeholder in IFCI with a 31.71-per cent.

The failure to appoint a regular chairman also had its impact heavily on the stock prices. “It gives a negative signal to the shareholders”, a stock dealer said. The government has appointed yet another stop-gap chairman, SK Kapur, who took charge from the outgoing “acting” chairman SK Ckakrabarti. Mr Kapur will hold charge till a regular chairman is appointed or till October 31.