IDBI Bank down 35% from peak: Is it time to buy the dip? – News Air Insight

ET Intelligence Group: Shares of IDBI Bank plunged nearly 16% on Monday on reports that the government might defer the stake sale as bids from potential buyers came in below the reserve price. This has extended the stock’s fall to 35% from the 52-week high of ‘118.5 hit on January 5, sharply compressing its valuation. Within a fortnight, the lender’s trailing price-to-book multiple has fallen to 1.4 from 2.1, making the stock appear inexpensive. However, despite the correction, investors should wait for a meaningful improvement in the bank’s financial performance before turning optimistic.

The central government holds 45.5% stake while Life Insurance Corporation of India (LIC) has a 49.2% stake in IDBI Bank. According to news reports, the government is looking to divest 30.5% stake whereas LIC will sell around 30% holding. In a note to exchanges on Monday, the bank has clarified that it has not received any communication from the government with respect to scrapping of the divestment plan.

For potential bidders, the proceeds of the stake sale will go to the government. It means the buyer would require to pump capital into the bank to facilitate future growth. The lender’s price-to-book multiple had soared from 1.7 a year ago to above 2 in February after reports suggested that the government was progressing well with the stake sale process. Given the latest news flow, the bank’s financial performance will once again come to the fore while assessing the stock’s future potential.

IDBI Bank continues to show a declining trend in net interest margin (NIM), return on assets (ROA) and return on equity (ROE). Its NIM fell by 165 basis points (bps) year-on-year to 3.5% in the December 2025 quarter. While NIM of banks came under pressure due to repo rate cuts by the Reserve Bank of India last year, several banks including HDFC Bank, Bank of India, Yes Bank, RBL Bank expanded their margins in the December quarter.

However, the bank has managed to improve the asset quality as its gross non-performing assets (GNPA) reached 2.6% as of December 2025, showing reduction of 100 bps from the year ago level. Gross advances of the bank grew by 14% year-on-year to ‘2.5 lakh crore as of December 2025. The share of corporate loans in the total loan book has stagnated at around 29%. Given these factors, the stock’s attractiveness will depend upon the trend in profitability and the growth trajectory of the loan book.