IDBI Bank shares surge 12% as divestment process enters next stage.

IDBI Bank Shares Surge 12% as Divestment Process Advances to Next Stage

Shares of IDBI Bank surged by up to 12% on January 16, 2025, to reach ₹82 per share following the news that the state-run lender has moved into the next stage of its divestment process. This significant jump in the stock price comes after Moneycontrol reported that KPMG, a global consultancy firm, is currently conducting closing due diligence on the bank. This marks a crucial step in the process, bringing potential investors closer to making formal financial bids for the 60.7% stake that the government is looking to divest.

KPMG’s Role in IDBI Bank Divestment Process

KPMG’s due diligence is an essential part of the IDBI Bank divestment process. Once this due diligence report is completed, it will be presented to the bank’s board and subsequently shared with potential buyers. This report will provide an in-depth assessment of the bank’s financial health and operations, laying the groundwork for investors to submit their financial bids.

The Department of Investment and Public Asset Management (DIPAM) will invite bids from interested investors, with the final divestment process likely extending into FY26. However, it is expected that bids will not be invited before March 2025.

Importance of Closing Due Diligence

The closing due diligence conducted by KPMG is seen not only as a step toward the completion of the divestment but also as a strong corporate governance measure. In December 2020, KPMG also carried out a vendor due diligence, which laid the foundation for potential investors to begin submitting their expressions of interest (EOI) in October 2022. The ongoing due diligence process adds an extra layer of transparency to the divestment process, which is crucial for building trust with potential buyers.

IDBI Bank Stock Performance and Market Trends

The surge in IDBI Bank’s shares comes after a period of relative stability. The stock had reached a 52-week high of ₹107 per share on July 29, 2024, but since then, it had remained rangebound, with a 10% drop over the past six months. This is in contrast to the Nifty 50 index, which has only declined by about 5% in the same period. Today’s jump is a clear indication that investors are reacting positively to the latest developments in the divestment process.

IDBI Bank’s Financials and Future Outlook

As IDBI Bank moves closer to completing the divestment process, its financial performance continues to show promise. The bank is set to report its third-quarter results on January 20, 2025. According to its provisional update for Q3FY25, net advances grew by 18% year-on-year to ₹2.1 lakh crore, and total deposits increased by 9% year-on-year to ₹2.8 lakh crore.

Furthermore, on December 31, 2024, the board of directors of IDBI Bank approved a plan to raise ₹10,000 crore through long-term bonds to fund infrastructure and affordable housing projects. The bank will raise up to ₹5,000 crore by March 31, 2025, with the remaining amount to be raised in FY26. This initiative aligns with a broader trend of banks raising funds through infrastructure bonds, amidst slower deposit growth in the sector.

Looking Ahead: What’s Next for IDBI Bank Shares?

With the divestment process advancing and strong financial results expected, the outlook for IDBI Bank stock remains positive. The successful completion of the divestment could lead to further market optimism, especially if the stake sale draws interest from prominent investors.

For investors, IDBI Bank’s long-term growth potential in the infrastructure and housing sectors, along with its divestment process, adds an interesting element to the stock’s future performance. However, as always, investors are advised to stay updated on the due diligence reports and the upcoming financial results, which could provide further clarity on the bank’s trajectory.

Conclusion: A Critical Phase for IDBI Bank

The 12% surge in IDBI Bank shares on January 16 is a direct reflection of the market’s positive reaction to the progress in the divestment process. As KPMG’s due diligence continues and the bank approaches its financial bidding stage, all eyes will be on how the divestment unfolds and what impact it will have on the bank’s future.

With its strong financial performance and the divestment’s potential impact, IDBI Bank remains a stock to watch in the coming months. Investors should closely monitor updates from the bank regarding its third-quarter results, as well as the divestment process, to gauge the next steps for the stock.


Key Takeaways:

  • IDBI Bank shares rose 12% following the news of the divestment process advancing.
  • The closing due diligence by KPMG is a critical step before financial bids are invited.
  • IDBI Bank’s net advances grew by 18% YoY, and deposits increased by 9% YoY in Q3FY25.
  • The bank plans to raise ₹10,000 crore via long-term bonds for infrastructure and affordable housing.
  • The divestment process could extend into FY26, with bids expected around March 2025.

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