IDBI offers to convert Rs2,130.50 crore bonds into government equity

IDBI Bank Ltd proposes to convert Rs2,130.50 crore bonds issued to the Government of India into equity share capital of the bank, subject to regulatory and statutory requirements.

In its filing with the Bombay Stock Exchange (BSE) today, IDBI Bank said it has written to the government of its willingness, in principle, to convert the Tier-1 bonds of Rs2,130.50 crore (IDBI Omni bonds of Rs1,157.02 crore and Rs973.48 crore) issued to the government into equity share capital of the bank.

IDBI Bank issues Omni bonds from time to time as per its capital and business requirements. Such bonds are being targeted at institutional investors, including provident and superannuation funds.
CRISIL had assigned 'AA+/Negative' rating to IDBI Bank's Omni bonds. CRISIL had also reaffirmed its outstanding ratings on the bank's long-term debt at 'AA+/Negative', Upper Tier II bonds at 'AA/Negative', short-term debt programmes at 'P1+', and fixed deposit programme at 'FAAA/Stable'.

The rating on the Upper Tier II bonds reflected the bank's weak financial risk profile, marked by a modest Tier I capital adequacy ratio. IDBI Bank's Tier I CAR is expected to reduce further because of the bank's growth plans, coupled with limited flexibility to enhance capitalisation.

The bank's lending capacity has been further eroded with the stuck Rs900 crore loan issued to cash strapped Kingfisher Airlines ignoring its own internal assessment report, which revealed that the aviation company was in deep trouble.