Temasek, CPPIB in fray to pick up Indian banks’ stakes in IL&FS

Singapore investment firm Temasek Holdings Pte. Ltd and Canada Pension Plan Investment Board (CPPIB) are among five potential investors in talks with State Bank of India (SBI) and Central Bank of India to buy the Indian lenders’ stakes in Infrastructure Leasing and Financial Services Ltd (IL&FS), two people familiar with the development said.

The stakes in the infrastructure financing firm could be worth at least Rs.1,500 crore in total, said one of the two people, adding that the transaction is likely to be concluded in the next one month. Both spoke on condition of anonymity.

Among the nine shareholders in IL&FS, SBI holds a 6.42% stake and Central Bank of India 7.67%. Other shareholders include state-run insurer Life Insurance Corporation of India (25.34%), ORIX Corp. of Japan (23.54%), sovereign wealth fund Abu Dhabi Investment Authority (12.56%), Housing Development Finance Corp. Ltd (9.02%), and IL&FS Employees’ Welfare Trust and others with 13.77%.

“At present, barring a few banks, most of the banks, especially in the PSU (public sector unit) space are looking to monetize their stakes held in other firms and transfer the money to their books to augment their capital. Also, it is preferable to capitalize the assets when the proportion of NPAs (non-performing assets) reaches a certain level. So, SBI and Central Bank of India both have good reasons to liquidate their holdings in other firms,” said the second of the two people cited earlier.

“The total valuation of IL&FS is around Rs.10,000-11,000 crore. So, the total value of the deal involving the sale of the two banks’ stakes in IL&FS could be around Rs.1,500 crore,” the first person added.

“The discussions are still on and the deal may happen in the next 15 days if the buyers agree. Global sovereign funds such as Temasek, Canada’s pension fund trust, a Dubai-based large sovereign fund and two others are among the potential buyers of the stake. Another option being discussed is if Abu Dhabi Investment Authority could increase its stake by purchasing the two banks’ stakes in the firm,” this person said

The two people said that SBI Capital Markets had been appointed as the banker by IL&FS to advise it on the potential stake sale.

“We won’t comment on this,” said an SBI Capital spokesperson.

Hari Sankaran, vice-chairman and managing director of IL&FS, declined to comment on the development.

“We do not comment on market speculation,” said a Temasek spokesperson in response to an email query fromMint.

An email sent to CPPIB was not answered.

“The bank had given a mandate to an investment banker to sell the stake held in IL&FS but it had lapsed. I am not sure if a fresh mandate has been given to anyone to carry out the intended transaction,” said a senior Central Bank of India official on condition of anonymity.

Central Bank of India has been trying to sell its stake in IL&FS for two years.

An email and messages sent to SBI remained unanswered till the time of going to press, while calls made to the SBI officials concerned were not returned.

With rising bad assets and large sums of money needed for recapitalization, public sector banks have been pushed by the finance ministry to look at the divestment of non-core assets to raise funds.

On 28 June, Press Trust of India reported that SBI will divest non-core investments of around Rs.3,000 crore to shore up its capital.

Earlier, on 15 June, Mint had reported that SBI had sold a 5% stake in National Stock Exchange to private equity firm ChrysCapital.

In February, in an interview with Mint, Bank of Baroda managing director and chief executive officer P.S. Jayakumar said the bank would not ask for an infusion from the government and was looking at selling non-core assets as an option to unlock capital over the next 12 months.

In March, Kishor Kharat, managing director and chief executive of IDBI Bank, said the bank was planning to raise about Rs.6,500 crore from the sale of non-core assets.

“We are expecting to raise Rs.1,200-1,500 crore by the end of this year through sale of non-core assets,” he said.

Shrija Agrawal and Swaraj Singh Dhanjal contributed to this story.

This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.