Stake Sale Nod Sends IDBI Bank Shares Up 15%

Is there any corelation between the sudden spurt in the share price of IDBI Bank and the central Cabinet’s announcement, approving its divestment on Wednesday? Trading data says so. The trading data of the last four months also indicates the IDBI Bank counter was accumulating shares since January 2021.

Shares of IDBI Bank surged 15 per cent to Rs 43.50 on the BSE in the intra-day trade on Thursday, after the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle approval for strategic disinvestment, along with transfer of management control in IDBI Bank.The extent of respective shareholding to be divested by the government and Life Insurance Corporation (LIC), however, will be decided at the time of structuring the transaction, in consultation with Reserve Bank of India (RBI).

The IDBI Bank stock opened 9 per cent higher at Rs 41.35 on the BSE on the back of heavy volumes. Around 2.7 million equity shares had changed hands on the BSE in the first few minutes of trade, as compared to an average 1.74 million shares traded in the past two weeks. The counter clocked the trading volume of 1.02 crore shares at the end of the day, to close at Rs 40.50, up by Rs 2.55 (6.72 per cent). In comparison, the S&P BSE Sensex was up 0.56 per cent (up by 272 points) at 48,950 points.

The IDBI Bank counter was on the radar of informed traders since the beginning of January 2021, when, during the month, 3.44 crore shares were traded. In February 2021, the trading volume was up by 16 per cent at 3.99 crore shares. March saw trading volume shooting up to 8.22 crore shares, up by 106 per cent. In April, total number of IDBI Bank shares traded were 2.35 crore, while in the first four trading sessions of May 2021, 2.17 crore shares have already changed hands.

Another point that indicates informed buying in the counter is stable percentage of deliverable quantity. This quantity is the number of shares that investors buy and hold in their demat account, compared to total number of shares traded during the month. The deliverable quantity was 42.50 per cent in January, 32.08 per cent in February, 40 per cent in March and 33 per cent in April. In the first four trading sessions, the percentage of deliverable quantity was 33.08 per cent.

“Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, Government of India (GoI), vide their email dated May 05, 2021 has informed that CCEA has given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank,” the Bank said in exchange filing.

LIC’s board has also passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank by divesting its stake, along with strategic stake sale envisaged by GoI with intent to relinquish management control, and by taking into consideration price, market outlook, statutory stipulation and interest of policy holders. This decision of LIC’s board is also consistent with the regulatory mandate to it to reduce its stake in the bank.

Together, GoI and LIC own 94.72 per cent of equity of IDBI Bank (GoI 45.48 per cent, LIC 49.24 per cent). LIC is currently the promoter of IDBI Bank with management control, with GoI its co-promoter, the Bank said.