IDBI call for offers by March
The government plans to come out with an expression of interest by March-end for the strategic sale of IDBI Bank and hopes to complete the exercise before the end of next fiscal, a senior government official said.
“We expect the EOI will be out this fiscal before end-March 2022. The Reserve Bank of India (RBI) is now on board. We have sorted out issues with the RBI so that everybody has clarity — RBI, ourselves and the bidders,” Tuhin Kanta Pandey, secretary, department of divestment, told The Telegraph.
“It takes nine months to one year for a merger and acquisition if we start an EoI. If we launch an EoI by the end of this year, we should be completing the transaction by the end of next year,” he said.
“There are licenses involved and we do not want any uncertainty after the financial bids are placed. We plan to sell LIC’s and the government’s stake together and the LIC’s management control will be passed on. But not the entire (stake) may go,” he said.
The IDBI exercise will be the first instance where a bank has not been sold under duress.
“So far RBI has been doing it in a distress situation using their powers. But here, it will be a voluntary discovery of a buyer through an open bidding process. Such a thing has not taken place so far. This is the first instance,” Pandey said.
“What we have learnt from our experience is that the more clarity we have before launching the smoother it will be in completing it. Although we can have some flexibility at the end, we cannot go back and forth too much. Broad conditions have to be clear right from the beginning at the EOI stage.”
Asked whether the government would sell at least a 51 per cent stake, Pandey said it did not matter as the voting shares in case of banks were capped. “In banks, the voting shares are capped at 26 per cent. So even if we have 51 (per cent stake), the voting is capped. That’s by law.”
The government holds 45.48 per cent in IDBI Bank, while LIC holds 49.24 per cent. LIC is the promoter of the bank with management control and the Centre is the co-promoter.
The extent of stake sales by the government and the insurer will be decided after consultations with the RBI, the Centre said.
The Centre allows foreign direct investment (FDI) in private banks up to a maximum threshold of 74 per cent of the paid-up capital. It allows 20 per cent FDI in PSU banks under the government approval route.
The government will hold road shows in the coming months and decide on the amount of stake offloaded to make the lender more lucrative among big domestic and foreign investors.
The strategic buyer will have to infuse funds, technology and implement best management practices. The new buyer will have to generate more business without any dependence on LIC and government assistance for funds, the government had said.