IDBI

: A Resilient Bet Amid Delayed Privatisation

’s stock dropped 26% year-to-date following the government's cancellation of its ongoing strategic sale process. The bids received fell below the government's minimum reserve price expectation, removing an immediate upside catalyst for investors. Favourable Risk-Reward in FY27: Despite the recent setback, the strategic divestment of the 60.7% stake held by the government and LIC remains on track for FY27. Given severe fiscal deficit pressures from West Asia crisis subsidies, the government is highly motivated to meet its ₹80,000 crore miscellaneous capital receipts target, making a reviewed reserve price likely. Strong Fundamental Backing: The bank’s downside is heavily cushioned by excellent financial health, boasting a robust Return on Assets (ROA) of 2.27% and a Return on Equity (ROE) of 18% for FY26. Core profitability remains supported by well-controlled operating expenses and negligible credit costs. Robust Liability & Asset Franchise: IDBI Bank commands a massive deposit base exceeding ₹3.47 lakh crore. Its CASA ratio stands at a healthy 44.59%, which is significantly higher than the banking sector average, while its net credit-to-deposit ratio remains balanced at 73%. Clean Balance Sheet: The loan book has evolved into a retail-heavy portfolio (70%), primarily driven by stable home loans. Asset quality is highly secure, supported by manageable stressed assets, high provision coverage, and an additional contingent provision of ₹1,139 crore. Attractive Valuation: Trading at 1x its estimated FY28 book value at a market price of ₹75, the bank looks reasonably valued. Because LIC is unlikely to exit its multi-crore investment at a loss (below its acquisition cost of ~₹61), the government will resist divesting below current market levels, presenting a solid accumulation opportunity for long-term investors.