ICICI Securities suggests BSNL-MTNL merger

11th March 2005: Financial adviser ICICI Securities has recommended the merger of state-run phone companies Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL), a government official told reporters on Friday. The official, who did not want to be named, said one of the options suggested by the investment bank was that unlisted BSNL should buy the government's 52% stake in MTNL or MTNL should become a unit of BSNL. The government had appointed ICICI Securities to look at ways to synergise the operations of these two public sector firms.

Rs 8,000-crore revamp package for IDBI, IFCI, IIBI

10th March 2005: Finance minister P Chidambaram will shortly move a fresh Cabinet note for extending an Rs 8,000-crore restructuring package for IDBI, IFCI and IIBI. While part of the funds has already been disbursed during the last two years, the new proposal specifies the annual support to the institutions over the next seven years. According to finance ministry officials, the comprehensive package includes a Rs 2,521.89-crore succour to IDBI over 2003-04 to 2007-08 and Rs 5,220 crore compensation to IFCI over 2002-03 to 2011-12. They said the restructuring of FIs would entail merger of Kolkata-based IIBI (Industrial Investment Bank of India) and Delhi-headquartered IFCI with IDBI in the current calendar year. For IIBI, the ministry plans to provide Rs 143 crore in the current fiscal to enable it service its liabilities and another Rs 221 crore for subscription to preference capital for redeeming its preference shares.

"IDBI’s merger exercise will be completed in three phases. While the first phase would involve the merger of IDBI and IDBI Bank, the second phase would involve IIBI’s merger with IDBI and then IFCI would be merged with IDBI in the third phase," the official said. In the fiscal 2005-06, IFCI and IDBI are likely to get Rs 225 crore and Rs 512.99 crore respectively as part of the restructuring plan. In 2006-07 again, an Rs 225 crore financial package would be provided to IFCI while IDBI would get Rs 324.99 crore. The government had set up an Rs 9,000-crore Stressed Assets Stabilisation Fund to handle the non-performing assets of IDBI. IDBI has transferred its bad loans to the SASF after which the NPA level of the IDBI has come down to 2.14% compared to 18.7% in June 2004. The finance ministry has also pointed out that this would enable IDBI to borrow at lower costs.

Earlier, there was a proposal to merge the ailing IFCI with the Punjab National Bank. However, it was then decided by the UPA government that IFCI be merged with IDBI due to commonality of assets. Officials also said that while finalising the restructuring proposal, the government has tried to address issues relating to safeguard of interest of the small investors, salvaging the credit rating of the institutions and prevention of systemic crises. The restructuring proposal came up due to the rising NPA level for FIs. The Narsimham Committee and Khan Working Group had earlier examined the functioning of the FIs and recommended that they should either convert into commercial banks or non-banking finance companies.

Deutsche buys 3.7% in HDFC Bank for Rs 713.4 cr

11th March 2005: Deutsche Securities today bought about 3.7 per cent in HDFC Bank at Rs 713.4 crore. It bought 1.16 crore shares at Rs 615 per share in a block deal on the Bombay Stock Exchange within minutes of trading hours opening. Singapore-based JP Morgan Partners' (formerly the Chase Group) India private equity fund (Mauritius) sold its stake in the market. DSP Merrill Lynch brokered the deal. The HDFC Bank scrip ended the day on the BSE at Rs 615.10 after rising to Rs 629.95. On closing, it lost 0.51 per cent against its previous close of Rs 618. The total volume at the HDFC Bank counter on the BSE stood at 720 crore.