IDBI Bank privatization process likely to end by September 2023

 IDBI Bank privatization process likely to end by September 2023

The process of privatization of IDBI Bank is likely to end by September next year, PTI quoted officials as saying.

Financial bids for the sale will be invited by March and the process is expected to end by September 2023. The central government, in association with Life Insurance Corporation (LIC), last week invited preliminary bids to sell 60.72% stake in IDBI Bank. The deadline for submitting Expression of Interest (EoI) is December 16.

Once the EoI comes in and the interested parties have approved the RBI's 'fit and proper' assessment and the Ministry of Home Affairs (MHA) security clearance is received, data room access will be given to the eligible bidders. The bidders will place the financial bids only after due diligence.

Officials said it usually takes around six months for the due diligence process to be completed and the financial bids to come. We expect to invite financial bids for IDBI Bank by March.

Given that this will be the first case of a strategic sale in the bank, a lot of questions are expected to be raised during the due diligence process.

Submit bids personally or in the form of private sector banks, foreign banks, Reserve Bank of India (RBI) registered non-banking finance companies, SEBI-registered alternative investment funds (AIFs), a fund/investment vehicle incorporated outside India will be allowed to do. Federation

The net worth limit for bidders has been capped at Rs 22,500 crore, and they will have to report net profit in three of the last five years. In addition, 40% of the equity has to be locked in for 5 years.

LIC currently holds 49.24% stake in IDBI Bank, while the government holds 45.48%. The remaining 5.2% is held by the public shareholders.

After the conclusion of this strategic sale, the combined stake of the government and LIC in IDBI Bank will come down from 94.72% to 34%.

The government will sell 30.48% stake and LIC will sell 30.24%, taking the total to 60.72%, with the transfer of management control.

If the Bidder intends to amalgamate IDBI Bank with itself, the Government and LIC shall vote for such amalgamation or merger at the Board or Shareholder Meetings.

The privatization of IDBI Bank was first announced in the Union Budget for 2021-22, following which the Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in May 2021.

IDBI Bank was classified as a private sector bank by RBI with effect from January 21, 2019, as a result of which LIC acquired 51% of the total paid-up equity share capital of the bank.

Shares of IDBI Bank closed at Rs 46.55 per piece, up 9.02% over the previous close on BSE. At the current market price, the sale of 60.72% stake would fetch the exchequer around Rs 30,000 crore.