Given the complexities, the department of investment and public asset management, which is driving the process, has proposed a two-stage step. In the first, interested parties will be screened on the specified parameters and if they meet the criteria, they will need to clear RBI’s “fit and proper” test as well as the home ministry’s security check.
In the second phase, those who make the cut will be provided the request for proposal and submit financial bids. The successful bidder will have to make an open offer, which is triggered on the acquisition of 25% stake.
To participate in the first stage, prospective bidders must submit an expression of interest by December 16.
While the IDBI Bank stake sale has been in the works for a few years, the move signals the government’s intent to go ahead with the privatisation plan at a time when analysts were expecting to go slow in the wake of crucial assembly elections as well as general elections in the first half of 2024. The sale process is being closely watched as finance minister Nirmala Sitharaman has announced plans to sell stake in two public sector banks.
IDBI Bank, which has been a problem child of sorts, saw LIC step in at the behest of the government before it slipped into the red and was among banks that saw restrictions imposed on its operations under RBI’s prompt corrective action (PCA) policy. The government believes that the lender is now in good health and an attractive bet for investors.
While RBI has made exceptions in terms of doing a fit and proper assessment at the initial stage itself, large industrial or corporate houses are not allowed to participate. Public sector companies too are not allowed to participate in the IDBI Bank sale process.
The preliminary information memorandum also mentioned that in line with the regulatory norms, voting rights will be capped at 26%. Given that the government and LIC will hold around 19% each, the successful bidder will be the only entity with veto power.
In addition, the buyer, even if it is a consortium, has to hold at least 40% of the paid-up and voting equity share capital of IDBI Bank for five years. Bidders will have to provide a 15-year glide path to reduce their shareholding in line with RBI norms.
In the past too, the government has sought to sell its stake in IDBI Bank, but the process has not gone through.
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