The overdose of bank IPOs to the primary market has already changed the industry valuations. Since a plethora of banks, both private and private, have tapped the public, big institutions, who are key players in providing exit opportunities to retail investors, have shifted their preference to professionally-well managed banks. Corporation Bank is the only bank which has, more or less, withstood the bear onslaught on the secondary market. The larger banks like Bank of Baroda and Bank of India are trading ata hefty discount to their offer prices. On the other hand, investors are bearing the brunt of several crores of capital erosion in banks like SBT, SBBJ, Dena Bank, Jammu & Kashmir Bank and City Union Bank.

Several investors got carried away by the bank IPO boom and locked their money but with capital appreciation conspicuous by its absence, several of them have already turned very selective so far as investing in bank IPOs is concerned.

Although IDBI Bank issue is priced at a lowest price to NAV of around 1.26-1.49 compared to many other banks like ICICI Bank, IndusInd Bank and UTI Bank, the offer price is way above its current bookvalue of Rs 12.44.A new private sector bank, IDBI Bank has only 25 branches. The IDBI Bank offer is at a price-earning multiple of 8.09-9.95 which is close to the current industry average of 9.6 for private sector banks.

IDBI Bank is offering 4 crore equity shares and the issue size could vary between Rs 68-80 crore depending on the premium. IDBI Bank has reserved 4 lakhequity shares at a price of Rs 17-20 for its employees on preferential basis. Also, a sizeable portion of 44 lakh shares is being reserved for IDBI shareholders on preferential basis. The net public offer will range between Rs 60-71 crore.

The IDBI Bank issue is likely to hit the market at the end of January 1999. The bank is going public at a time when there is no other bank IPO on the cards. And if there is a secondary market revival in January, this would help IDBI Bank issue have a smooth sail.

Promoted by IDBI and SIDBI, the post-issue promoters' stake will go down to 57 and 14 per cent respectively. IDBI Bank is tapping the public with the main objective of improving its capital adequacy ratio, which has fallen to a critical level of 9.08 as on September 30, 1998 as compared to 9.82 per cent as on March 31, 1998. This has perhaps prompted the bank to collect the entire issue price as application money.

IDBI Bank has a total asset base of Rs 2844 crore as on September 30, 1998. Although the bankrecorded an impressive growth in total income to Rs 142.3 crore for the first six months of the current fiscal against the full-year figure of Rs 166 crore last fiscal, high cost of funds restricted growth in net profit to Rs 9.4 crore against the full-year figure of Rs 20.05 crore.

IDBI Bank's lending is restricted to a few mid and large corporates. Against a deposit base of Rs 2514 crore, IDBI has a lower level of advances at Rs 900 crore. This also helped the bank have a lower level of net NPAs of just 0.32 per cent. The annualised EPS works out to Rs 1.88 against the figure of Rs 2.01 for fiscal 1998. During the period 1996-98, net profit has increased from Rs 0.9 crore to Rs 20.05 crore. EPS has gone up from Rs 0.09 to Rs 2.01. Bookvalue has increased from Rs 9.45 to Rs 12.44 per equity share. The bank's paid-up capital will increase from Rs 100 crore to Rs 140 crore after the issue.