Why IDBI Bank Share Price is Rising

The banking sector, a crucial artery of developing India, has lately remained a standout performer on the bourses.

Within the sector, IDBI Bank has emerged as a strong contender. The bank's shares have rallied 36% so far in 2024 and 60% in the year gone by.

But the good news for IDBI investors doesn't end there.

The bank grabbed headlines again today after the Reserve Bank of India (RBI) released a much-anticipated report. Following this report, IDBI's share price witnessed a significant 5% jump.

What exactly was in this report, and why is it such a positive development for investors in IDBI Bank?

Let's delve deeper and explore the details of the report and how it might impact IDBI's prospects.

RBI's Approval of Bidders for Privatisation

Shares of IDBI Bank rose today after Reserve Bank of India (RBI) approved bidders for the bank ahead of the Union Budget 2024.

IDBI Bank was on the privatisation list for years. The government awaited the RBI's assessment of bidders to ensure they met "fit and proper" norms. These norms ensure that the bank complies with regulations and are not under investigation by other regulators.

The central bank approved all but one bidder, a foreign participant who did not share information. The participant's overseas regulator also did not provide data.

The Government of India (GoI) and Life Insurance Corporation (LIC) collectively own 94.7% of IDBI Bank. LIC holds a 49.2% stake, and the government holds 45.5%. Public shareholders hold the remaining 5.3%.

The government plans to sell a 60.7% stake in the bank, including 30.5% of its own and 30.2% of LIC's. With IDBI's market cap nearing Rs 950 billion (bn), it could realise around Rs 290 bn from the disinvestment.

Market observers see IDBI Bank as an easier divestment candidate since it operates as a private lender, with government stakes increasing due to capital infusions to manage bad debt.

The RBI's report ensures that bidders meet the 'fit and proper' criteria and comply with regulations to proceed to the next privatisation stage.

What Next?

Going forward the company plans to focus on several key areas to ensure sustained growth and profitability. The primary targets and strategies include expanding the retail franchise by opening new branches across India to enhance presence and accessibility.

Additionally, the company will invest in digital banking services, enhancing internet and mobile banking platforms to provide seamless, multi-channel access for customers.

The company aims to introduce new deposit products catering to various customer segments, focusing on increasing current account and savings account (CASA) deposits to build a low-cost and stable deposit base.

The bank will scale up a granular and well-collateralised loan portfolio, focusing on retail and priority sector segments, as well as well-rated corporates. Strengthening credit underwriting processes and closely monitoring loan accounts will be crucial in managing the loan portfolio effectively.

Enhancing risk management practices and promoting awareness among employees regarding the importance of compliance and corporate governance are also priorities.

The company also plans to leverage its association with LIC for business growth and utilise data analytics and customer relationship management (CRM) systems to grow the deposit base and identify new opportunities.

Future growth targets include further increasing the number of branches and ATMs, enhancing digital platforms for a better customer experience, focusing on growing deposits, especially CASA deposits, and maintaining a healthy loan portfolio.

Strengthening risk management and compliance practices will continue to ensure sound business operations. By focusing on these areas, the company aims to achieve robust growth and maintain its position as a trusted and preferred bank.

How IDBI Bank Share Price has Performed Recently

In the past five days, IDBI Bank share price has rallied 6.4%. In the last month, it is up 5.9%.

In 2024, so far its share price has surged 36% and its up 60.4% in the last one year.

The stock touched its 52-week high of Rs 98.7 on 06 February 2024 and a 52-week low of Rs 56.1 on 25 July 2023.

About IDBI Bank

DBI 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.

For a sector overview, read our banking sector report.

You can also compare IDBI Bank with its peers.

IDBI Bank vs Indian Bank

IDBI Bank vs Yes Bank

IDBI Bank vs Bank of Maharashtra

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing

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...