The government on Friday invited expressions of interest (EoIs) for IDBI Bank and offered to sell a total of 60.72 per cent stake in the bank, including major portions of the shares held by the government and state-run Life Insurance Corporation (LIC).
IDBI Bank’s stock closed 0.71 per cent higher on the BSE on Friday. At the current market price, the stake being offloaded is worth Rs 27,800 crore. With the consent of the regulators — the Reserve Bank of India and the Securities and Exchange Board of India — the government has made the mandatory glide path for stake reduction for the buyer more flexible than what is specified for promoters of private banks. The buyer, therefore, would get 15 years to bring down the equity to 26 per cent. Of course, in the first five years, 40 per cent of the equity capital would be locked in, as per the RBI guidelines.
The last date for submission of EoI is December 16. While the Centre is keen to conclude the transaction during the current financial year, it may spill over to the next year, given the formalities to be completed. Banks, non-banking financial companies and private equity funds have already shown interest in IDBI Bank.
The Centre’s disinvestment receipts so far this fiscal year have been Rs 24,544 crore, as against the annual target of Rs 65,000 crore. “A cumulative 60.72 per cent of the shareholding shall be divested. GoI shall divest such number of shares representing 30.48 per cent and LIC of India shall divest such number of shares representing 30.24 per cent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank,” the department of investment and public asset management (Dipam) said in a statement.
Currently, LIC holds 49.24 per cent in IDBI Bank, while the government holds 45.48 per cent. On May 5, 2021, the Cabinet Committee on Economic Affairs had granted in-principle approval for the strategic disinvestment of IDBI Bank along with transfer of management control.
IDBI Bank posted profit after tax of Rs 2,439 crore in FY22.
Its net interest margin stood
at 3.73 per cent and return on equity at 13.60 per cent. The bank’s capital to risk (weighted) assets ratio stands at a comfortable 19.06 per cent.
As per the EoI conditions, private sector banking companies, foreign banks, NBFCs, and alternative investment funds registered with Sebi are among the entities eligible to bid. However, large industrial/ corporate houses and individuals (natural persons) aren’t eligible. FE
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