The government and the Life Insurance Corporation of India (LIC) may sell up to 65% of their stake in IDBI Bank before the end of the current financial year.
These majority stakeholders will have to do a basic benchmark in terms of ceding ownership in the bank. The process may start with 51% odd and then they might go up to 65%. This means that the LIC and the government might be left with up to a 35% odd stake. Currently, they hold a 95% stake in the bank. The government holds 45.5% while the LIC holds 49.24%.
The strategic sale of the shares was approved by the Cabinet in May. Further, the DIPAM, on July 9th announced that the Cabinet Committee of Economic Affairs (CCEA) has given its go-ahead to the government and LIC to offload 100% of their stake in IDBI Bank, along with a transfer of management.
The expression of interest (EOI) has yet to come out and a certain process has to be followed. The government might be looking at August- September as a target for the EOI for selling their stake in the bank. If that happens then the government will have nine to twelve months of timeline left to wrap up the transaction.
Discussions are going on with the RBI and it might be possible that private equity investors may be given a majority play in the IDBI Bank divestment process.
Earlier this month, the government said that it has completed the strategic divestment of Odisha-based Neelachal Ispat Nigam Ltd (NINL) to Tata Steel Long Products Ltd.
The Department of Investment and Public Asset Management (DIPAM) on July 9 had clarified that there will be only one transaction advisor who would manage the entire share sale process as the LICs stake will be sold alongside the government.
The government had urged the RBI to give the potential buyer some leeway in complying with the regulatory norms for private banks, including a time-bound reduction in promoter holding, in order to make the deal attractive.
Further, it wants a longer window for the IDBI Bank to comply with the market regulator’s minimum public float norm of 25% for listed companies. According to the RBI’s norms that were revised in November 2021, the promoters of private banks have to maintain a minimum of 40% of the paid-up voting equity share capital of the bank for the first five years after the start of operations.
In the past three months, the shares of the company have fallen by more than 23%. They are currently trading at ₹ 35.50 apiece.
IDBI Bank reported losses for five years after which it reported a net profit of ₹ 1,359 crores for FY21 and ₹ 2,439 crores for FY22.
Written by Simran Bafna
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