The shares of IDBI Bank shot up by 10% today as the government invited bids for the bank’s privatization. As of 12:20 IST, the shares of the private sector bank were trading at Rs. 47.07 a piece. Based out of Mumbai, IDBI Bank is a large-cap government-controlled bank with a market value of over Rs. 50,000 crores.
The government and LIC of India together hold a 94.72% stake in the lender. Life Insurance Corporation (LIC) owns 49.24% of the bank while the government owns 45.8% of the bank respectively. Presently, minority shareholders control a 5.2% stake in the company.
In order to meet the disinvestment target for FY23 of Rs. 65,000 crores, the Department of Investment and Public Asset Management has decided to sell a 60.72% stake in the bank. It will fetch the exchequer around Rs. 27,800 crores. After the disinvestment, the combined ownership of LIC and the government will amount to 34%.
December 16, 2022, has been notified as the last date for the submission of bids. The Reserve Bank of India (RBI) has restricted large industrial/corporate houses or individuals from submitting their applications.
After the acquisition of the stake, the investor will also have to make make an open offer to minority shareholders.
The DIPAM commented, “It is envisaged that strategic acquirer/investor will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank.”
The RBI changed the status of IDBI Bank to a private sector bank when LIC of India acquired a 51% stake in 2019. Later in the Union Budget of 2021-22, the Cabinet Committee on Economic Affairs gave in-principle approval for the privatization of the bank.
