The Centre and insurance giant LIC together own 94.71 per cent stake in the bank. The government owns 45.48 per cent of IDBI Bank, and is planning to divest a 30.48 per cent stake in the bank. Whereas, LIC plans to see a 30.24 per cent of its stake from its holding of 49.24 per cent in the bank.
The Reserve Bank of India (RBI) has been looking into at least five potential bidders keen on picking up a majority stake in IDBI Bank Ltd, a report in Reuters stated.
Kotak Mahindra Bank, Prem Watsa-backed CSB Bank and Emirates NBD are some of the names that have submitted expressions of interest, two sources said.
The divestment of IDBI Bank is the first major divestment exercise across state-owned banks as part of Centre’s broader privatisation plan and could fetch it $3.66 billion at the current market valuation. The Union government and LIC together own 94.71 per cent stake in the bank. The government owns 45.48 per cent of IDBI Bank and is planning to divest a 30.48 per cent stake in the bank.
Whereas insurance major Life Insurance Corp of India (LIC) plans to see a 30.24 per cent of its stake from its holding of 49.24 per cent in the bank.
Expressions of interest – the first step in the stake sale process – closed in January, the report said.
The potential bidders have since begun due diligence on the bank, sources said, who added financial bids were likely to be placed later this year.
The RBI is also carrying out a “fit and proper evaluation”, including extensive background and financial checks on the potential buyers, a crucial step before an investor is allowed to pick up a stake in a local bank, sources added.
The report said that potential investors have also raised questions around the extent of government control in IDBI Bank after the divestment since it will retain a 15 per cent stake and LIC will have a 19 per cent stake.
“The government does not intend to have any management control. The government will take a call if a written submission to that effect is needed,” sources quoted in the report said.
Ashvin Parekh, a management consultant, said buyers with an existing bank might be required to merge the operation with IDBI eventually because RBI regulations do not allow the same investor to own two banking entities.
Earlier, reported that the Centre is hoping to seek financial bids within three months for the proposed stake sale in IDBI Bank.
There were reports that claimed that due to volatility in the market and a fall in the stock price of IDBI Bank, the government might wait for the market conditions to stabilise before sealing the deal. It said that the government is thinking to defer the plan as it might get a lower than estimated value from the sale of the 60.72 per cent stake.
Denying any deferment of the disinvestment process of IDBI Bank, the Department of Investment and Public Asset Management (DIPAM) said the process is on track.
On March 17, DIPAM Secretary Tuhin Kanta Pandey had clarified that the government is moving ahead with the transaction as per the defined process in post-EoI stage following receipts of multiple EoIs.