The Hindu Business Line : IFCI acquisition: Will PNB pip IDBI?

THE race for IFCI Ltd has taken an interesting turn. As the finalisation of the due diligence report for IFCI enters its final lap, Punjab National Bank (PNB) is emerging as the favourite to acquire the troubled New Delhi-based term-lending institution.

Senior Finance Ministry officials said IFCI's due diligence, by SBI Capital Markets Ltd, shows clear synergies with PNB that could help clinch the merger deal in the latter's favour. The other suitor in the fray for IFCI is Industrial Development Bank of India (IDBI), a former development financial institution now converted into a commercial bank. "The due diligence is clearly showing that the synergy between IFCI and PNB is very high," a Finance Ministry official said.

He said the due diligence report is expected to be submitted by SBI Caps soon. However, extensive discussions have already been held between the Government and SBI Caps on the issue.

The officials said that among the synergies tipping the scale in favour of PNB was the fact that both the institutions, PNB and IFCI, were located in New Delhi. "It would be easier to take care of staff-related issues since both are in the same city," the officials said.

Moreover, they said PNB and IFCI have a lot of common lending accounts that could be better serviced by PNB after the merger.

The Government also feels that taking over IFCI would give PNB a wider reach, especially in the South where the former has a number of offices and established linkages with the corporate sector. PNB would also benefit from the project appraisal skills of IFCI.

"PNB is in the process of becoming a really big bank. IFCI's project appraisal skills would come in handy while its network of offices would help increase PNB's reach, especially in the South where it is not so strong," the officials said. IFCI has regional offices in major Southern cities, including Chennai, Hyderabad, Bangalore, Kochi and Panaji. The other IFCI offices are spread evenly across the country.

Incidentally, in recent times, PNB increased its presence in the South through its acquisition of Nedungadi Bank Ltd, which had a presence primarily in Kerala.

The boards of both PNB and IFCI, on January 30, cleared a proposal for the merger of the two institutions. However, after the change of Government at the Centre, it was widely believed that the plans could be altered. There has been intense political pressure from representatives of parties within the ruling United Progressive Alliance and the Left parties supporting the Government to go for a merger of IFCI with IDBI.

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IFCI acquisition: Will PNB pip IDBI?