Shares of a large-cap PSU Bank soared 9 percent higher on Monday’s early trades to reach an intraday high of ₹ 65.50 apiece on the National Stock Exchange (NSE) after the Central Government invited bids to appoint an asset valuer for the strategic divestment of the bank. Its shares settled at ₹ 65.10 apiece.
According to a release by the Department of Investment and Public Asset Management (DIPAM), the Government of India is looking to sell a 30.48 percent stake in the IDBI Bank, while the Life Insurance Corporation of India (LIC) is looking to sell a 30.24 percent stake in the bank, along with management control. Currently, they collectively own a 95 percent stake in the bank.
The bids will have to be submitted by October 9, 2023, and the asset valuer will give the fair value of the assets & liabilities of the bank. IDBI Bank’s investments, loans & advances, deposits, borrowings, and other liabilities will be considered for valuation.
In the past year, IDBI Bank’s share price gained 50.23 percent, as its share price increased from ₹ 43.30 apiece to ₹ 65.05. In contrast, the Nifty gained 10.55 percent in the past year.
IDBI Bank is engaged in the business of monetary intermediation of commercial banks, saving banks, postal savings banks and discount houses.
With a market capitalization of ₹ 64,654 crores, IDBI Bank is a large-cap company. It has a low return on equity of 1.24 percent and a dividend yield of 1.66 percent. Its shares were trading at a price-to-earnings ratio (P/E) of 15.50, which is slightly higher than the industry P/E of 13.97, indicating that the stock might be overvalued as compared to its peers.
Written by Simran Bafna
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