According to insiders, the Shriram Group has been working on a structure for a potential bid for IDBI Bank, the state-owned lender, that is being sold through a competitive bidding process and is likely to submit an expression of interest (EoI) for it soon, reported The Economic Times. The sources told ET that Shriram Group, a financier with its headquarters in Chennai, may establish a different holding company to take part in the privatisation of IDBI Bank.
R Thyagarajan-led Shriram Group operates in segments such as commercial vehicle financing, two-wheeler financing, and micro, small, and medium enterprise loans. Entry of Shriram Group as a bidder, could set the stage for at least a two-way contest for IDBI Bank with Prem Watsa’s Fairfax Financial also believed to be a contender.
Shriram has not come to a mutually agreeable commercial agreement with investors who might want to join its consortium. Discussions to establish a consortium with financial investors are underway. The non-bank lender will serve as the consortium’s lead member if one is formed.
According to reports, Shriram was one of 18 attendees in virtual roadshows held by the government in April to inform possible suitors about the privatisation plan. On October 7, the Indian government published a preliminary information memorandum outlining its plan to sell the majority of its holdings in IDBI Bank. The IDBI Bank’s EoI filing deadline is December 16.
When asked about his company’s interest in the upcoming privatisation of banks, Fairfax Chairman Prem Watsa told ET in an interview on April 7 that it was “looking at all of those chances.”
The privatisation of IDBI Bank is being done in two stages. EoIs will be submitted by interested suitors in the first. The Reserve Bank of India (RBI) will evaluate their eligibility to take part in the privatisation process, and they will be required to pass the regulator’s “fit and proper” test and obtain government security clearance. Those who have passed the first step may perform due diligence and submit a financial offer for the bank in the second round.
According to the preliminary information memorandum issued by the Department of Investment and Public Asset Management (DIPAM), the government and state-run Life Insurance Corp. of India (LIC) are selling a 60.72 per cent share in IDBI Bank. They hold 94.72 per cent of the bank together. They will each keep 34 per cent following the share sale. To submit an EoI, interested parties must have a minimum net worth of Rs. 22,500 crore.