“The government will sell stake in at least two public sector banks, as part of its privatisation plan in the next financial year” stated by Union Finance Minister Ms. Nirmala Sitharaman said in her budget speech on 1st February.
Stock market is always giving good gains on futuristic calls, but one must be able to take the right call on right stock. To make it workable, prospective Bank must have attractive financial parameters and size, with Govt also must be able to garner a significant sum of over Rs. 10,000 crores. Bank Of India and Union Bank is having Govt stake of slightly above 89% in both banks, with M cap of BoI at Rs. 19,300 cr and of Union at Rs. 23,000 crores. But both are unlikely to see this stake sale move, as Union Bank had just acquired Andhra and Corporation Banks, while BoI may see acquiring some weak and small PSB in FY22. Central bank and IOB is also ruled out, due to lot of pain of stressed assets, still seen existing with both these banks.
So, by filtering it further, we see 2 PSBs as privatisation candidates, being IDBI Bank and Bank Of Maharashtra. IDBI Bank has promoter stake of 94.71% (with LIC holding 49.24% and Govt holding 45.48%) with M cap of Rs. 31,200 crores. Bank of Maharshtra, having cleaned its books, as at 31-12-20, on all parameters, with Govt holding 93.33% stake, having m cap of Rs. 10,350 cr. IDBI Bank may attract existing large banks like Kotak, ICICI and Indusind, while Bank of Maharashtra may attract existing listed NBFCs (like M&M Finance, Bajaj L&T, Piramal, Aditya Birla Capital, Shriram, Cholamandalam and may be even Poonawala) aspiring to convert their NBFC in Bank.
Best part is that stock price of IDBI Bank and Bank of Maharashtra are ruling at lower end of the price range. So, sooner or later, BIG FISH may eye both banks in the secondary market.