Why IDBI Bank Share Price is Rising

The week gone by was amazing for investors.

If you would have picked a decent quality stock right after the Indian share markets crashed on election day, chances are you would be sitting on more than 20% gains till now.

Indian stocks have swiftly recovered the election day losses and they continue to rise. Benchmarks Sensex and Nifty hit a fresh record high today.

Keeping up with the market momentum, IDBI Bank has also shot up from Rs 78 on 4 June 2024 to Rs 90 at present.

Today, the stock price rallied more than 5% in early trade.

Let's look at the key factors helping the stock inch closer to its 52-week high.

#1 Massive Tax Refund

Today's gains could be attributed to the private sector lender receiving an income tax refund worth Rs 27 bn. This was for the 2016-17 period.

In an exchange filing over the weekend, the company said,

• We wish to inform you that IDBI Bank Ltd has received an Order under Section 254 r.w. Section 143(3) of the Income Tax Act, 1961 from the Income Tax Department, Government of India for the Assessment Year 2016- 17 on June 07, 2024.

The bank is in the process of evaluating the implications of this order on the financial statements, it further added.

Note that an income tax refund could possibly boost a bank's cash reserves, improving its liquidity.

This financial boost is often perceived positively by investors, as it not only improves the bank's capital but also suggests potential for higher dividend payouts and financial robustness.

#2 Strong Earnings Report

Apart from the above, IDBI Bank share price has been on a roll ever since it posted quarterly and full year earnings.

IDBI Bank's profit after tax (PAT) soared by 44% to Rs 16.3 bn in the fourth quarter from Rs 11.3 bn in the same quarter last year.

The company's net interest income rose by 12.5% to Rs 36.9 bn compared to Rs 32.8 bn in the year ago period.

IDBI Bank also announced a dividend of Rs 1.50 per equity share.

For the full year ended March 2024, the lender's net profit surged to an all-time high of Rs 56.3 bn.

#3 Potential Divestment to Resume Soon?

One more possible reason driving the positive sentiment in IDBI Bank shares could be the resumption of its divestment.

According to reports, the government is expected to carry forward the divestment process in IDBI Bank, which has been put on hold in the last few months.

The disinvestment has been delayed for various reasons including delays in regulatory approvals, security clearances, valuation differences, among others.

As of March 2024, the Government of India owns a 49.24% stake in IDBI Bank, while the country's largest insurance company Life Insurance Corporation (LIC) owns a 45.48% stake.

Now with the elections done and dusted, investors are looking out for the key agenda for the first 100 days of the Modi led government.

Sources close to the matter say that the new government is likely to focus on disinvestment in the first 100 days and IDBI Bank and Shipping Corporation of India could be the first ones.

Note that IDBI Bank's market valuation has almost doubled from Rs 450 bn in October 2022, when the DIPAM initially invited bids for the divestment.

The government's and LIC's stakes may be reduced to minority holdings of 15% and 19% respectively, once the divestment is done.

What Next?

IDBI Bank's performance has improved in the past two years as it focused more on retail lending and relatively high current account savings account (CASA) deposit proportion.

On the potential merger or privatisation, DBS Group Holdings, one of Singapore's largest lenders that has been investing in India, recently said that it's not considering buying a stake in IDBI Bank Ltd.

Whenever the government does put out bids to sell its holdings, there could be a healthy bidding war as this is a good opportunity for NBFCs to acquire IDBI Bank and reverse merge into it.

It should be noted that even though RBI categorised IDBI Bank as private sector bank, it continued to depend on government for capital.

We'll keep you posted on the divestment as and when there's an update... stay tuned to this space for more!

How IDBI Bank Share Price has Performed Recently

In the past one month, IDBI Bank share price has gained 6%.

In 2024 so far, the stock is up 29%.

Shares of the company gained 6% in early trade today to hit Rs 90 but later erased gained to trade at around Rs 87 levels.

IDBI Bank has a 52-week high of Rs 99 touched on 6 February 2024 and a 52-week low of Rs 53 touched on 12 June 2023.

In the year gone by, the stock price has moved up by more than 60%.

Here's a table comparing IDBI Bank with its peers -

Comparative Analysis

Company	IDBI Bank	Federal Bank	IDFC First Bank	RBL Bank	Yes Bank
ROE (%)	10.2	15.4	10.6	7.1	2
ROCE (%)	8.6	12.9	9.2	7.5	5.1
Latest EPS (Rs)	5.4	15.9	4.2	20.8	0.4
TTM PE (x)	15.9	10.4	18.7	12.1	56.5
TTM Price to book (x)	2.1	1.3	1.7	1.1	1.6
Dividend yield (%)	1.8	0.7	0	0.6	0
Industry PE	16.8
Industry PB	2.5

Data Source: Ace Equity, Equitymaster

About IDBI Bank

IDBI Bank was established in 1964 by an act to provide credit and other financial facilities for the development of the fledgling Indian industry.

It is a development finance institution and a subsidiary of Life Insurance Corporation (LIC).

Many national institutes find their roots in IDBI like SIDBI, India Exim Bank, National Stock Exchange of India, and National Securities Depository (NSDL).

Initially, it operated as a subsidiary of the Reserve Bank of India (RBI) and later RBI transferred it to the government of India.

On 29 June 2018, LIC got a technical go-ahead from the Insurance Regulatory and Development Authority of India (IRDAI) to increase stake in IDBI Bank up to 51%.

LIC completed the acquisition of 51% controlling stake on 21 January 2019 making it the majority shareholder of the IDBI Bank.

For more details, you can have a look at IDBI Bank factsheet and quarterly results on our website.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...