LIC, Centre to sell 60.7% stake in IDBI Bank; DIPAM invites EoIs

DIPAM invites EoIs; last date to submit bids is Dec 16

The Union finance ministry on Friday invited initial bids for strategic disinvestment in IDBI Bank to sell, jointly with the Life Insurance Corporation (LIC), 60.7 per cent in the bank.

According to the expression of interest (EoI) released by the Department of Investment and Public Asset Management (DIPAM), LIC, which owns 49.2 per cent in IDBI, will cut its stake to 19 per cent, while the government will reduce its shareholding to 15 per cent from 45.5 per cent at present.

When the markets closed on Friday, IDBI Bank’s market cap was nearly Rs 45,913 crore.

Even without a premium, LIC stands to garner Rs 13,844 crore, while the Centre can rake in Rs 13,994 crore from a successful stake sale. So far, the Centre has rung up Rs 24,543.67 crore as disinvestment receipts against the FY23 target of Rs 65,000 crore.

According to the EoI, the entities eligible to bid for IDBI Bank include private-sector banks, foreign banks, non-banking financial companies (NBFCs), alternative investment funds (AIFs) registered with the Securities and Exchange Board of India, or any other fund incorporated outside India. The bidder may submit its EoI solely on its own or as part of a consortium.

The successful bidder will have to bring down the equity to 26 per cent in 15 years, and in the first five years from the date of acquisition 40 per cent of the equity capital will remain locked in, according to central bank guidelines.

The interested parties should have a minimum net worth of Rs 22,500 crore ($2.85 billion) and reported profits in at least three of the last five financial years. If the successful bidder intends to amalgamate IDBI Bank with itself or if it is required by the Reserve Bank of India, the EoI says the Centre and LIC will vote in favour of such a step at meetings of the board or the shareholders of IDBI Bank. 

The last date for submitting written queries by interested bidders is October 28, 2022, and that for putting in bids is December 16, 2022. The last date for submitting physical copies of EoIs is December 23, 2022.

The Centre has engaged KPMG India as transaction advisor and “Link Legal” as legal advisor for providing advisory services and managing the transaction.

The EoI(s) will be valid for 180 days from the date of opening of the EoI and can be further extended by another 180 subject to conditions. The net profit of the bank increased to Rs 2,439 crore in FY22. As on March 31, 2022, IDBI Bank had 17,430 employees.

From January 2019, IDBI Bank was categorised by the Reserve Bank of (RBI) as a private-sector bank, after the government reduced its stake. The bank had been under the RBI’s “Prompt Corrective Action” framework since 2017 and came out of it in March last year.