Last week, the government and the Life Insurance Company (LIC) requested a preliminary offer for the sale of the 60.72 percent government stake in IDBI Bank. Expression of Interest (EoI) must be submitted no later than December 16 (EoI).
Qualified bidders will be given access to the data room once the EOIs are received, interested companies undergo RBI’s ‘Fit and Proper’ assessment and receive security clearance from the Ministry of Home Affairs (MHA). Bidders may submit a financial bid only after due diligence.
The time required to complete the due diligence process and receive financial offers is usually six months. According to the authorities, financial proposals must be submitted to IDBI Bank by March.
A lot of questions are expected to arise during the due diligence process as this would be the first strategic sale case in a bank.
According to officials, the strategic sale of IDBI Bank is likely to be completed by September.
Bids can be submitted by private banks, foreign banks, non-banking finance companies registered with the Reserve Bank of India (RBI), Alternative Investment Funds (AIFs) registered with Sebi, and funds or investment vehicles established outside India.
Bidders still have a minimum net worth requirement of 22,500 million and must disclose net profit figures for three of the previous five years. In addition, 40% of the equity must be committed for 5 years.
The government currently holds a 45.48 percent stake in IDBI Bank, while LIC currently holds a 49.24 percent stake. The last 5.2% of the shares are held by public shareholders.
After the completion of the strategic sale, the joint ownership of the government and LIC in IDBI Bank would decrease from 94.72 percent to 34 percent.
Along with transfer of management control, the government will sell 30.48 per cent stake and LIC will sell 30.24 per cent, taking the total stake to 60.72 per cent.
The government and LIC will vote in favor of the merger or amalgamation if the bidder wants to merge IDBI Bank with itself at the board or shareholder meetings.
The Economic Cabinet Committee gave its in-principle approval for the strategic divestment and transfer of management control in May 2021, after the Economic Cabinet Committee first announced the privatization of IDBI Bank in the 2021-2022 EU budget.
With effect from 21 January 2019, the RBI classified IDBI Bank as a private sector bank as LIC acquired 51% of the bank’s total paid-up equity.
On the BSE, shares of IDBI Bank closed at Rs. 46.55 per, up 9.02% from the previous close. At current market prices, the sale of the 60.72 percent share will bring about 30,000 billion to the state coffers.