In possibly the biggest sale of the Centre’s stake in a bank in decades, the government is pushing for a valuation of about Rs 64,000 crore (nearly $7.7 billion) for state-owned IDBI Bank, according to a Bloomberg report. It added that the valuation target means that the government is seeking a premium of around 33 per cent over its Thursday’s share prices.
Earlier this month, the government invited expressions of interest (EoI) for its and LIC’s stake sale in IDBI Bank. The stake sale will include the transfer of management control. The government and LIC will sell at least 60.72 per cent of IDBI Bank. The government and state-owned LIC together own nearly 94 per cent stake in the bank. The last date for submission of bids or EoI is December 16.
On the eligibility, the Department of Investment and Public Asset Management (DIPAM), while inviting EoI, said the potential investor should have a minimum net worth of Rs 22,500 crore, must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank. Also, a maximum of four members would be allowed in a consortium.
The Centre has decided to divest 30.48 per cent stake, while Life Insurance Corporation of India (LIC) will divest 30.24 per cent in the bank. The government currently owns a 45.48 per cent stake in IDBI Bank, while Life Insurance Corporation (LIC) owns 49.24 per cent controlling stake in the lender.
The successful bidder would be required to mandatorily lock in at least 40 per cent of the equity capital for five years from the date of acquisition. DIPAM has barred large industrial/corporate houses or individuals from participating in the bidding process.
In 2019, the state-owned life insurer infused Rs 21,624 crore into the bank. LIC is currently the promoter of IDBI Bank with Management Control and the government is the co-promoter.
On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of LIC shareholding to 49.24 per cent following the issuance of additional equity shares by the bank under a qualified institutional placement.
In Union Budget 2021, the Centre had announced a target of Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including two PSU banks and one insurance company in FY22.
Following this, in May 2021, the Union Cabinet gave its approval for the strategic divestment and transfer of management control in IDBI Bank.
According to media reports, the government is also reaching out to markets regulator Sebi for a two-year relaxation in complying with the public shareholding norms in the case of IDBI Bank. The relaxation is expected to make the strategic sale of the bank more attractive to a potential investor as there will be more time for complying with the norm.
Shares of IDBI Bank were on Friday trading 2 per cent up, or Rs 0.90, to Rs 45.85 apiece on the BSE during the day.
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