The Stock Holding Corporation of India Ltd (SHCIL), a subsidiary of the IDBI Bank and India’s largest custodian of securities, will be merged with the IDBI Bank. In a meeting held on Oct 30, the bank’s board gave its nod to the merger proposal, subject to statutory/regulatory and shareholder’s approvals.
According to the bank, it has appointed merchant bankers, chartered accountants and valuers for undertaking due diligence and valuation of SHCIL to determine the share swap ratio for the merger. As soon as the swap ratio is determined, a scheme of amalgamation will be prepared and the process of obtaining requisite approvals from statutory/regulatory authorities will be started. The deal is expected to be complete by March 31, 2013.
SHCIL counts among its shareholders various public sector financial institutions including IFCI, SU-UTI, LIC and GIC, among others, besides IDBI. These shareholders will get the shares of the IDBI Bank post merger.
Established in 1986, SHCIL is promoted by IDBI and six other public financial & investment institutions of the country. The company provides custodial services to financial intermediaries (mutual funds, FIIs), depository services to retail investors, as well as e-stamping, FD and bond distribution, mutual fund products, GOI Bonds and loan products, PF fund accounting, SGL constituent account services, etc., to institutional investors, banks, mutual funds and retail investors. The company operates through a network of 227 branches and employs around 1,300 people.
IDBI Bank has been focusing on cross-selling a wide range of financial products and services, so as to build a sustainable stream of fee-based income, besides building a more binding relationship with its customers. One of the key requirements for building a sustainable retail business portfolio is an extensive branch network. Although IDBI Bank has expanded its branch network over the years and currently has around 1,000 branches, there is a need to rapidly expand its footprint across the major banking centres of the country.
Its merger with SHCIL will build capabilities within the bank for HNI custody and asset servicing, and also push its retail banking operations. It will also be in a position to enhance its presence in third party distribution of financial products and gain entry into custody services. Accordingly, the bank can tap the potential from foreign banks/FIIs for custodial business, in view of its lower-cost model and the comfort level it offers.
SHCIL currently provides e-stamping business in 10 states, which has a synergistic fit with IDBI Bank’s franking business. SHCIL’s document management and broking subsidiaries can also be leveraged for generating substantial business and returns. The activity of insurance repository service will also help IDBI Federal Life Insurance Company.
From an HR perspective, IDBI Bank will be able to utilise the SHCIL workforce who has experience in third party distribution and retail customer handling.
Also, the bank will be merging with an entity that has a strong technology platform, thus enhancing its technology capabilities and building redundancies to take care of future expansion.
(Edited by Sanghamitra Mandal)