To be eligible for IDBI Bank’s bid, the Department of Investment and Public Asset Management (DIPAM) said potential investors must have a net worth of at least Rs 22,500 crore and net profits for three of the previous five years.
A consortium could only have four members in total.
The winning bidder is obliged to lock up at least 40% of the share capital for five years from the date of acquisition.
He further stated that the Reserve Bank will select the qualified stakeholders and the equity position of these companies in IDBI Bank. The bidder must pass the “Fit and Proper” assessment of the banking regulatory authority.
It also prohibited private individuals or large corporations from participating in the bidding process.
Potential buyers have until December 16 to submit an offer or Expression of Interest (EoI).
The government and LIC jointly own 94.72 percent of IDBI Bank. The government owns 488.99 billion shares or 45.48 percent in IDBI Bank, while the Life Insurance Corporation (LIC) owns 529.41 billion shares or 49.24 percent of the bank. 5.2% of shareholders are public.
The Department of Investment and Public Asset Management (DIPAM) has announced the sale of the government’s share of 60.72 percent of IDBI Bank’s share capital and the investment of LIC, as well as the handover of the bank’s management.
The total shareholding of LIC and the state will come down to 34% after the share sale.
IDBI Bank’s shares closed at HUF 100 on the BSE on Friday. 42.70, an increase of 0.71 percent over the previous close. The 60.72 percent stake would be worth more than Rs 27,800 crore at current market pricing.
Private sector banks, foreign banks, RBI-registered non-banking finance companies, Sebi-registered Alternative Investment Funds (AIFs) and a fund/investment vehicle registered outside India can submit bids individually or as a consortium for the privatization of IDBI Bank according to the relevant preliminary information memorandum (PIM) (issued by DIPAM).
The purchase of IDBI Bank is subject to the FDI regulation, which permits foreign ownership of 74% with the approved procedure and 49% with the automatic method. The bank must always keep at least 26% of its paid-up capital in the hands of local residents.
“The price at which shares of IDBI Bank can be transferred to a person resident outside India shall not be less than the price worked out as per SEBI guidelines,” PIM said.
The EoI stated that the successful bidder is required to make an open offer to the public shareholders of IDBI Bank and deposit the full consideration payable under the offer in cash, in case of full acceptance.
According to Sebi’s open offer requirements, a buyer must make a buyout offer to minority shareholders when they acquire “control” of a listed company or 25% or more of its shares in the aggregate.
5.2% of IDBI Bank’s shareholders are small entrepreneurs.
“The strategic acquirer/investor is envisioned to provide funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank,” PIM said.
PIM stated that before qualified stakeholders are granted access to the data room, DIPAM will obtain the required Security Clearance (QIP). In addition to submitting the letter of intent, interested parties, directors and shareholders with a stake exceeding 10% must also submit a self-declaration for the security certificate.
Further, at the time of submission of the EoI, the interested parties and each consortium member shall make a declaration or disclosure of any order, pending investigation or proceeding of any court, regulatory authority, SFIO, NCLT or NCLAT.
The successful tenderer is required to align its shareholding to the RBI criteria by reducing or diluting its shareholding as per the glide path provided by the QIPs at the RFP stage.
As per RBI’s ‘Master Directions on Ownership in Private Sector Banks, 2016′, banks have 15 years from the commencement of their operations to reach the required shareholding level.
The Government of India and LIC will vote in favor of any merger or consolidation at IDBI Bank’s board and/or shareholders’ meetings if the successful bidder proposes to do so or if required by the RBI under the PIM.
KPMG India Pvt Ltd and Link Legal are the transaction and legal advisors for the sale of IDBI Bank’s stake.
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 Reserve Bank of India classified IDBI Bank as a private sector bank due to the purchase of 51% of the bank’s total paid-up share capital by the Life Insurance Corporation of India (LIC).
In 2022-2023 (April-March), the government set a target of 65,000 billion in revenue through divestment, of which 24,544 million has already been collected.