The Department of Investment and Public Asset Management (DIPAM) has received 167 queries from at least 9-10 potential serious bidders about the proposed stake sale and transfer of management control in IDBI Bank. This shows a strong interest in the proposed transaction.
“The department has received multiple queries from a number of bidders. These queries ranged from those related to eligibility criteria, residency requirements, and regulatory fit and proper assessment, to corporate restructuring and other related business matters. The department tried to address and clarify all the concerns that serious bidders had about the proposed expression of interest (EoI),” an official said. “Bidders are showing huge interest in the stake sale.”
According to sources, at least three private equity firms, one foreign bank, and a couple of alternative investment funds (AIFs) have sought clarity, apart from some home-grown firms, on the proposed deal and the EOI.
The government, on October 7, invited bids for privatising IDBI Bank. The Centre said it and LIC would sell a cumulative 60.72 per cent stake in the financial institution.
“Interested bidders either an individual entity or a consortium of foreign funds can own up to 60 per cent of the bank, that’s what the invite for an EoI will offer,” the official said, adding that the government and the Reserve Bank of India (RBI) would keep addressing the issues raised during the process by potential bidders.
On Tuesday, DIPAM said that it would allow a consortium of foreign funds and investment companies to own over 51 per cent of IDBI bank, clarifying the foreign ownership criteria were for new private banks and not applicable to existing ones.
The clarification should pave the way for private equity funds and alternative investment funds (AIFs) to pick up the majority stake as the current norms restrict foreign ownership in the private sector lender.
Last week, the department made certain clarifications with respect to norms that are applicable to public sector banks and said those would not apply to IDBI Bank after the government and LIC sold their stakes, even though they together would continue to hold about 34 per cent in the bank.
The government has also said that IDBI Bank will operate as a private sector bank, even if it were to be taken over by a foreign bank.
On queries related to minimum public shareholding, which requires a listed company to have a public float of 25 per cent, the government said the matter is being examined, along with the transition period for compliance.
The IDBI stake sale is a two-stage process. In the first stage, those bidders that meet initial eligibility criteria shall be allowed in the ‘fit and proper’ assessment as prescribed by the RBI. Then they will have to get clearance from the Ministry of Home Affairs.
After that, the qualified bidders would proceed to the second stage where financial bids would be sought.
DIPAM expects to invite financial bids by March 2023. The deal is expected to be closed by the middle of the next financial year.