IDBI Bank strategic sale: Bids expected by September, says DIPAM secy

According to DIPAM secretary Tuhin Kanta Pandey, the  Centre is expecting to get financial bids for IDBI Bank’s strategic sale by September this year.

The Department of Investment and Public Asset Management (DIPAM), which manages government holdings in state-owned enterprises, had in October invited bids for selling 30.48 per cent stake in IDBI Bank, along with 30.24 per cent stake of Life Insurance Corporation (LIC).

A host of global and domestic institutions have expressed interest in buying about 61 per cent of the government’s and LIC’s stakes in IDBI Bank and put in preliminary bids, the last date for which was January 7.

“Overall, we are looking at financial bids at least before the second half (October-March) of the next fiscal year,” Pandey told PTI.

The government and LIC together hold 94.72 per cent stake in IDBI Bank, which will come down to 34 per cent after the strategic sale.

Two sets of clearances

Talking about the way forward in the strategic sale, Pandey said the work on two sets of clearances — security clearance from the government and Fit and Proper clearance from the RBI — would happen simultaneously.

Also read: Govt gets multiple preliminary bids for buying 61 pc stake in IDBI Bank

“Once it (security clearance and Fit and Proper clearance) is cleared, we qualify them (bidders). Then we take them to the virtual data room on signing of the non-disclosure undertaking. Then they can do due diligence, and draft agreements will be shared,” Pandey said.

The respective agencies will have intensive work before the bidders can be qualified for the second round, the secretary said, without disclosing the timeline for the clearances.

The investors who have put in EoIs (expressions of interest) have already submitted the required information to secure the clearances, and those details would be forwarded to the RBI and respective government agencies.

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The transaction is expected to get over in the second half of the next fiscal year beginning April 2023.

Conditions for bidders

After the transaction, the government will own 15 per cent stake and LIC 19 per cent in IDBI Bank, taking their total holding to 34 per cent. The government had last year asked SEBI to treat its residual stake in IDBI Bank as a financial investment since it would not exercise any control over the bank and will have no board seat.

Reclassification of the government’s remaining 15 per cent stake in IDBI Bank as public will make it easier for the buyer of IDBI Bank to meet the mandatory 25 per cent minimum public shareholding norm. Currently, public shareholding in IDBI Bank is 5.28 per cent.

Also read: Cabinet clears over ₹9,000 cr capital infusion in IDBI Bank

Earlier, DIPAM had said the potential buyers should have a minimum net worth of Rs 22,500 crore and must have reported a net profit in three out of the last five years to qualify to bid for the bank.

In addition, a maximum of four members would be permitted in a consortium. Also, the successful bidder must lock in at least 40 per cent of the equity capital for five years from the date of acquisition.

Shares of IDBI Bank were trading at Rs 55.70 apiece on Wednesday, down 0.45 per cent from the previous close on BSE.

(With agency inputs)