The government announced on Friday that it is seeking Expressions of interest to sell a 60.72% stake in the $5.6 billion IDBI Bank.
The government announced on Friday that it is seeking Expressions of interest to sell a 60.72% stake in the $5.6 billion IDBI Bank.
As part of the sale process, the state-owned Life Insurance Corporation of India will dilute its stake in IDBI Bank, with the total stake sale comprising a 30.48% stake from the government and a 30.24% stake from LIC.
While inviting Expressions of Interest, the Department of Investment and Public Asset Management (DIPAM) stated that the potential investor must have a minimum net worth of Rs 22,500 crore and must have reported net profit in three of the previous five years to be eligible for bidding for IDBI Bank.
Bids can be placed by banks, alternative investment funds, shadow banks, foreign lenders, and offshore funds. On the other hand, corporations, large industrial houses, and Individuals are not eligible to bid.
The bidders that will be short-listed will have to pass the central bank’s fit and proper assessment, and the successful bidder must make an Open offer to IDBI Bank’s public shareholders. Also, a consortium would be limited to a maximum of four members.
The winning bidder would be required to lock in at least 40 percent of the Equity capital for a period of five years from the acquisition date.
According to central bank guidelines, there will be a lock-in in Proportion to the investment vehicle’s holdings in the Case of a consortium.
In accordance with existing rules for private banks, the voting rights ceiling is set at 26%. Despite the fact that the government and the state-owned LIC own a majority stake in IDBI Bank, the government classifies it as a private lender.
According to the PIM, the price at which IDBI Bank Equity shares can be transferred to a person residing outside India must not be less than the price determined in accordance with SEBI guidelines.
According to the PIM, the price at which IDBI Bank Equity shares can be transferred to a person residing outside India must not be less than the price determined in accordance with SEBI guidelines.
The time limit for submitting expressions of interest is December 16.
It may be mentioned that the government and LIC own 94.72 percent of IDBI Bank together. The Life Insurance Corporation (LIC) owns 529.41 crore shares, or 49.24 percent of IDBI Bank, while the government owns 488.99 crore shares, or 45.48 percent. A 5.29 percent stake is held by the public in IDBI Bank as of the end of June.
The government will sell 30.48 percent of IDBI Bank’s equity share capital, while LIC will sell 30.24 percent, for a total of 60.72 percent of IDBI Bank’s equity share capital, along with the transfer of management control, the Department of Investment and Public Asset Management (DIPAM) said during the invitation for bids.
After the stake sale, the combined shareholding of LIC and the government will be 34 percent.
IDBI Bank’s shares closed at Rs. 42.70, up 0.71 percent from the previous close on the Bombay Stock Exchange on Friday. At the current market price, the 60.72 percent stake is worth more than Rs. 27,800 crore.
IDBI Bank’s shares closed at Rs. 42.70, up 0.71 percent from the previous close on the Bombay Stock Exchange on Friday. At the current market price, the 60.72 percent stake is worth more than Rs. 27,800 crore.
The PIM stated that a strategic investor is expected to infuse new technology, funds, and best management practices for the optimal development of IDBI Bank’s business growth and potential.
Furthermore, the DIPAM will obtain the necessary security clearance before granting qualified interested parties access to the Data Room (QIPs). Along with the EoI, interested parties, shareholders and directors holding more than 10% would be required to submit a self-declaration for security clearance.
Besides, when submitting the EoI, each member of the consortium and the interested parties would be required to make a declaration or disclose any order/pending investigation/proceedings by any court/SFIO/regulatory authority/NCLAT/NCLT.
To align its shareholding with the Reserve Bank of India guidelines, the successful bidder will also be required to reduce or dilute its shareholding according to the glide-path submitted at the RFP stage by the QIPs.
To align its shareholding with the Reserve Bank of India guidelines, the successful bidder will also be required to reduce or dilute its shareholding according to the glide-path submitted at the RFP stage by the QIPs.
The RBI’s Master Directions on Ownership in Private Sector Banks, 2016, allow a timeline of 15 years from the date of the bank’s commencement of business to achieve the prescribed shareholding limit in the long run.
According to the PIM, if the successful bidder plans to merge IDBI Bank with itself, or if the RBI requires it, the LIC and the GoI will vote in favour of such a merger at IDBI Bank’s Board or shareholders’ meetings.
Edited by Prakriti Arora
