Indian Bank may close loss-making subsidiaries

http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article2030220.ece

Chennai, May 18:

Indian Bank may close down its loss-making subsidiaries that operate in the housing and merchant banking segments.

When Indian Bank was going through a crisis a decade ago, the Government had, as part of its restructuring efforts, advised the bank to close down its non-profitable businesses. It is unclear why the bank had not done it then. In the last couple of years, the bank made various attempts to revive its loss-making subsidiaries, but without success.

Mr T.M. Bhasin, Chairman and Managing Director, Indian Bank, told Business Line that the bank would make a formal application to the Finance Ministry regarding its subsidiaries.

He said if the bank closes down its subsidiaries, the shareholders would be given shares of Indian Bank according to the guidelines of Securities Exchange Board of India. IndBank Merchant Banking and IndBank Housing have been reporting losses and are a drain on promoter Indian Bank, said Mr Bhasin.

The IndBank Merchant Banking reported a loss of Rs 10 crore in 2010-11 compared with a loss of Rs 1.6 crore the previous year. The shares closed on Wednesday at Rs 11 on the Bombay Stock Exchange, lower by 0.63 per cent. Its third subsidiary Ind Bank Mutual Fund has been defunct for the last few years.

Asked whether merger was an option, Mr Bhasin said the legal experts have advised that such moves would take close to six years as there are income tax implications that would have to be considered.

IndBank Housing established in November 11, 1987 came out with a public issue on February 15, 1993. The housing subsidiary stopped accepting and renewing deposits and making fresh loans for over a decade now. The company continues to receive financial support from its promoter, Indian Bank. The financial results for 2010-11 are not available, but the company made a loss of Rs 3.8 crore in 2009-10. The company's share, on Wednesday, closed at Rs 17 on the Bombay Stock Exchange, lower by 2.86 per cent

In 2009-10, it had recovered about Rs 5.2 crore of bad debts from housing loans, project loan accounts and inter-corporate deposits against Rs 7.6 crore in the previous year.