IDBI Bank privatisation: Centre plans to offload majority stake, invites expressions of interest

The Union government has invited expressions of interest (EoIs) for the privatisation of the IDBI Bank. The government plans to offload 30.48 percent of its stake, along with another 30.24 percent stake held by the Life Insurance Corporation of India. The winning bidder will get a 60.72 percent shareholding and management control in IDBI Bank.

The Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey told CNBC-TV18 that the IDBI Bank transaction is the first one that is based on competitive bidding.

"This is a process based on open competitive bidding and therefore it is a unique experience for the government and also to some extent for the RBI," he said. While talking about the eligibility criteria for the bidding, Pandey said that the RBI's guidelines have got rationale. The bids can be submitted as part of a consortium or by single entities.

Banks, shadow banks, foreign lenders, alternate investment funds as well as offshore funds have been allowed to place bids. However, large industrial and corporate houses as well as individuals are not eligible to bid.

Pandey said that the government would keep 15 percent residual equity and LIC would keep 19 percent residual equity for the time being. "It will be really up to us to decide the time without any constraint so far as the government and LIC on the other side are considered. We have to keep in mind this is a listed bank and there will be further requirements of how it is done," he added.

The government and LIC own nearly 94 percent of IDBI Bank. While the Centre owns a 45.48 percent stake, LIC held 49.24 percent as of June 30, data shows.

Pandey said that going forward, it is important that the capital is brought in further for the bank's growth, following which the government and LIC can exit. "In any case, LIC and government were to exit. This is not something where there was no exit. The only thing is that this decision has been taken to do it together in a strategic disinvestment manner," he said.

He said that there would a requirement of an open offer in the IDBI Bank divestment process as it is a standard SEBI requirement an that would have to be done. Pandey said that the potential investors in IDBI Bank would need time to do their due diligence.

"In the banking sector, we have to see the due diligence process, because the potential bidders will have to look at the books and everything and subject to their satisfaction on due diligence via virtual data room.  And of course, there will be requirements of fit and proper as usual, from the RBI, which has also been factored in," he said.

The DIPAM secretary added that IDBI Bank has a banking licence and anybody who holds the shares, the licence is given to the entity. "It's an IDBI Bank, which has a licence, and it will be continued irrespective of change of ownership," he said.

In the Union Budget 2021, the government announced its intention to exit IDBI Bank. The disinvestment strategy refers to the sale or liquidation of government-owned assets. Governments use disinvestment to reduce their fiscal burdens and raise money for public needs. They may also be done to privatise the assets.

The IDBI Bank stake sale has seen multiple ups and downs, and the process has been delayed by months. Initially, the government planned to invite EoI in May, however, the process got delayed with its attempt to try to reach out to potential buyers and bidders.