Private banks queue up to buy IIBI assets

Some major private sector banks, such as Deutsche Bank, Yes Bank, Kotak Mahindra Bank, Standard Chartered Bank, and financial institution Industrial Finance Corporation of India (IFCI) are in the race to buy the Rs 500-crore standard loan assets and investments of the Industrial Investment Bank of India (IIBI).

 

Such a takeover, as and when happens, could shake up banking equations between borrowers and creditors in the country.

 

This is a part of the liquidation process of the Kolkata-based IIBI, which is also selling its real estate properties and Rs 950-crore loan accounts, which are non-performing assets (NPAs), as separate integrated baskets.

 

"Most borrowing entities have stopped paying the installments to the IIBI. But now things will be different as the successful bidders will try to recover the amounts at the earliest. Borrowers cannot evade paying installments once the bids are settled," said a top IIBI official.

 

The due diligence of the standard assets basket concluded on June 9 and the bids would have to be filed by June 20. Since most of the employees have been shifted to other nationalised banks, the recovery process has stopped completely.

 

And, consequently, there are no

voluntary payments by the borrowing entities, the IIBI official told Business Standard. IIBI has appointed Deloitte Touche Tohmatsu India as advisors for the sale process.

 

The investment bank's standard loans comprise 20 loan accounts, aggregating principal outstanding of Rs 305 crore together with the underlying collaterals, securities, personal and corporate guarantees and pledged equity shares.

 

IIBI investments of Rs 150 crore comprise government guaranteed securities, bonds, debentures, equity holdings and preference shares in around 40 companies.

 

Some of the 20 standard loan accounts on sale belong to big companies such as Ispat Industries, Tata Teleservices, S Kumars Nation Wide, Mahindra Forging and Hindustan Motors with principal outstanding of Rs 126.16 crore, Rs 31.50 crore, Rs 10.12 crore, Rs 3 crore and 18.49 crore respectively.

 

"The private sector banks have already started investigating the accounts and they are very serious about the recovery of these loans, which are nearly NPAs," a source close to the development said.

 

IIBI is expected to announce the names of successful bidders by July 30, 2008. The investment bank will use the funds generated from the sale to clear liabilities.