Banks unsure of finding buyers for their non-core investments

Written by Shayan Ghosh | Mumbai | Updated: Feb 27 2014, 08:51am hrs
The recent open offer by rating agency Moodys for shares of Icra gives Punjab National Bank and Central Bank, both of whom hold stakes in the Indian rating agency, an opportunity to exit a non-core business. The open offer at R2,000 per share will not fetch either PNB or Central Bank too much money but its more than they invested. Not all banks will be as fortunate but India Ratings senior director Ananda Bhowmik sees banks attempting to sell non-core investments nevertheless.

Last Monday, a consortium of stakeholders, led by IDBI, rejected the sole bid for their stakes in Credit Analysis & Research (Care). The consortium was disappointed since they were approached by just one buyer and the price offered was lower than the R900 per share anticipated.

IDBI Bank holds the largest chunk of shares at 16.69% at the end of Q3. An IDBI executive said the offer should perhaps have been left open for a longer period but banks had wanted to complete the sale by the end of March.

While a few state-owned lenders may be looking to dispose of stakes in peripheral businesses, the market for such assets appears to be dull. A senior banker at State Bank of India said the bank is not scouting for buyers right now as its is difficult to gauge what kind of investors might want to invest in a niche business like that of the Clearing Corporation of India (CCIL), that provides clearing and settlement for transactions in Money, GSecs and foreign exchange. SBI owns a 26% stake in CCIL, while IDBI Bank and ICICI Bank hold 7.50% and 5.50%, respectively.

Abizer Diwanji, head of financial services, Ernst & Young, believes banks are on the lookout for capital and stake sales in companies that they had once helped set up, could come in handy. Diwanji, however, is not sure how attractive a valuation banks will get for their stakes.

Central Bank hopes to raise R3,000 crore by selling its 8.34% stake in Infrastructure Leasing and Financial Services (IL&FS). The biggest shareholder in IL&FS is Life Insurance Corporation (LIC) with a 25.34% stake, followed by ORIX Corporation Japan, that has 23.04%. Its hard to value unlisted assets, a Central Bank official said confirming the bank wants to sell the stake.