The finance ministry on Friday invited initial bids for strategic disinvestment in the IDBI Bank with an aim to jointly sell 60.7 per cent in the bank along with the Life Insurance Corporation (LIC) of India.
According to the expression of interest (EoI) released by the Department of Investment and Public Asset Management (DIPAM), LIC will cut its stake in IDBI Bank to 19 per cent, from the 49.2 per cent it holds currently. The government will reduce its stake to 15 per cent from 45.5 per cent at present.
As of Friday market closing, IDBI’s market cap was nearly Rs 45,913 crore. Even without a premium, LIC stands to garner Rs 13,844 crore, while the Centre can rake in Rs 13,994 crore from a successful stake sale.
So far, the centre has garnered Rs. 24,543.67 crore as disinvestment receipts against the FY23 target of Rs 65,000 crore.
As per the EOI, the entities eligible to bid for IDBI Bank include private sector banking companies, foreign banks, Non-Banking Financial Companies (NBFCs), Alternative Investment Fund (AIF) registered with SEBI or any other fund incorporated outside India. The bidder may submit its EoI solely on its own or as a part of the consortium.
The successful bidder would have to bring down the equity to 26 per cent in 15 years and in the first five years from the date of acquisition, 40 per cent of the equity capital would remain locked in as per central bank guidelines.
The interested parties should have at least a minimum net worth of Rs 22,500 crore ($2.85 billion) and must have reported profits in at least 3 out of the last 5 financial years.
If the successful bidder intends to amalgamate IDBI Bank with itself or if the same is required by RBI, the EoI says the Centre and LIC will vote in favour of such a step at Board or shareholders’ meetings of IDBI Bank.
The last date for submission of written queries by interested bidders is October 28, 2022 and the last date for submission of bids is December 16, 2022. The last date for submission of physical copies of EoIs is December 23, 2022.
The centre has engaged KPMG India Private Limited as the transaction advisor and “Link Legal” as the legal advisor for providing advisory services and managing the transaction.
The EoI(s) shall be valid for 180 days from the date of opening of the EoI and can be further extended by another 180 subject to conditions.
The net profit of the bank increased 79.47 per cent to Rs 2, 439 crore in FY22. As on March 31, 2022, IDBI Bank had total staff strength of 17,430. From January 2019, IDBI Bank was categorised by the RBI as a Private Sector Bank, after the government reduced its stake. The bank had been under RBI’s PCA (Prompt Corrective Action) framework since 2017 and came out of it in March, 2021.