Market regulator, the Securities and Exchange Board of India (SEBI) gave a nod to reclassify the government’s holding in IDBI bank as ‘public’, after the divestment.
Following the news, the bank’s shares shot up 9.04% by 12:00 PM on Friday’s trades to reach a high of ₹ 59.70 apiece on the National Stock Exchange (NSE) even as increased volatility dented market sentiments.
The government and the state-run insurance behemoth, the Life Insurance Corporation of India (LIC) will collectively sell a 60.72% stake in IDBI Bank, as a part of the divestment plan.
Currently, the Government and LIC collectively hold a 94.72% stake in the bank. The Government holds 49.24%, while LIC holds 45.48%. The government will offload 30.48% of its stake, while the remaining 30.24% will be divested by the LIC.
SEBI granted the approval on the condition that the government’s voting rights shall not exceed more than 15% post-divestment, said IDBI bank in a release. Meanwhile, the Department of Investment and Public Asset Management (DIPAM), which is the nodal agency for divestments, said the government will not play any role in the day-to-day running of the bank.
DIPAM further asked the regulator to treat the residual investment after the sale of the stake, as a financial investment, since the government will not exercise any control over the affairs of the bank.
According to the filing, IDBI Bank will have to make an application to the stock exchanges for the reclassification of the Government’s holdings under the public category, post-divestment.
In addition, the SEBI has asked the new acquirer to ensure compliance with the minimum public shareholding requirements within a period of one year from the completion of the offer in terms of the existing provisions of SEBIs Regulations. Therefore, the new acquirer will have to comply with the mandatory 25% minimum public shareholding norm.
The Central Government aims to raise ₹ 65,000 crores through divestment in 2022-23 (April-March), of which, it has raised about ₹ 31,100 crores so far.
Written by Simran Bafna
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