IDBI stake sale: To help the buyer, centre asks Sebi to ease norms

The government offered to sell a total of 60.72% stake in the IDBI bank, in early October

The central government has asked the Securities and Exchange Board of India (Sebi) to ease the mandatory shareholding norm for the potential acquirer of IDBI Bank by treating the combined residual stake of the Life Insurance Corporation (LIC) and the government after the strategic sale as a part of the public float, according to Financial Express (FE). 

The report added that it will give the buyer sufficient time to expand the business and increase the bank's valuation. 

After the sale of the stake, LIC and the centre will together hold a 34 per cent stake in the IDBI Bank. As per Sebi's norms, a company must have 25 per cent public holding within three years of listing. 

IDBI Bank currently has a public holding of 5.28 per cent. It is majorly owned by the government and LIC. 

The government offered to sell a total of 60.72 per cent stake in the bank, in early October. Of this, 30.48 per cent is held by the government and 30.24 per cent by the LIC. However, out of the total, LIC and the centre hold 49.24 and 45.48 per cent stakes in the bank respectively. 

According to FE, a strategic investor may not offload a stake in the first three years. During that period, they may set up new management, rebrand and restructure the company. 

It also added that the government has fixed this sale in such a way that the buyer may raise its stake to 66 per cent, up from the original offer of 60 per cent by adding 5.28 additional per cent via public offer. 

According to Sebi’s takeover regulations, the acquisition of an aggregate of 25 per cent shares in a listed entity would trigger an open offer.