IDBI Bank stock hits 52-week high, experts suggest to stay invested for further upside

The government and LIC together are looking to sell 60.72 percent in IDBI Bank and had invited bids from potential buyers in October. The last date for submitting Expression of Interest (EoI) or preliminary bids was set at December 16, which was later extended to January 7.

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Shares of IDBI Bank hit 52-week high on January 9 after a report suggested that Emirates NBD & Prem Watsa-led Fairfax Group may join IDBI Bank race for a majority stake in the lender.

The government and LIC together are looking to sell 60.72 percent in IDBI Bank and had invited bids from potential buyers in October. The last date for submitting Expression of Interest (EoI) or preliminary bids was set at December 16, which was later extended to January 7.

Also Read: Govt gets multiple bids for disinvestment of stake in IDBI Bank

Middle East banking powerhouse Emirates NBD and billionaire Prem Watsa-led Canada’s Fairfax Group are likely to have submitted EOI’s or expressions of interest earlier this week for a majority stake in IDBI Bank, multiple sources in the government and the industry familiar with the development told Moneycontrol.

“Emirates NBD and Fairfax Group are amongst bidders who may have expressed interest in the first stage of the process and put in EOI’s,” said one of the persons cited above.

A second person confirmed the names of the above two likely suitors and added that prospective bidders may rope in partners at a later stage post-consultation with the government and the RBI.

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Additionally, a third person said that the name of Luxembourg-based private equity firm CVC Capital Partners was also doing the rounds as an interested party, but Moneycontrol could not independently verify if the firm had finally submitted an EOI.

“It’s a high-profile deal and a big cheque and there is a likelihood that consortiums involving PE firms, who will be keen to partner, may be formed at a later stage,” the third person added.

The stock has already zoomed over 94 percent in the last 6 months.

According to Vaishali Parekh, Vice President – Technical Research at Prabhudas Lilladher, the stock has given a decent rally and again retested the previous peak zone of Rs 61 where there is a resistance barrier. A decisive breach above the Rs 61 zone is required to confirm a breakout and carry on the momentum still further.

“The next target zone would be near Rs 65-66 levels which the previous long term peak zone and at the same time, a decisive breach below Rs 53 levels would negate our positive view and can anticipate for further slide. Overall one can stay invested till the mentioned levels are maintained,” he added.

Going by the historical deals in the banking space, the privatisation of IDBI Bank can lead to value creation higher than its current market capitalisation.

At the current market price of Rs 59, IDBI Bank is trading at around 1.5 times book value estimated for FY24. While the improved fundamentals and return ratios (ROA of 1 percent and ROE of 15 percent in Q2 FY23) are welcome, IDBI Bank is undoubtedly trading at a premium valuation.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.?