IDBI Bank disinvestment progresses, due diligence begins, to end by H1FY26

The Union government and Life Insurance Corporation jointly hold a 95 per cent stake in IDBI Bank, of which they are selling 60.72 per cent

Potential buyers of IDBI Bank can now review confidential data as part of the due diligence process, after a 12-month pause in its sale, according to a report by The Economic Times. The prospective buyers are Fairfax Financial, Emirates NBD, Oaktree Capital, and Kotak Mahindra Bank, who submitted expressions of interest in January 2024.

 

The Union government and Life Insurance Corporation (LIC) jointly hold a 95 per cent stake in IDBI Bank, of which they are selling 60.72 per cent. The government has reviewed applications from potential buyers, marking a key step forward in the bank’s disinvestment process.

 

According to The Economic Times report, these bidders now have access to a cloud-hosted data room containing critical non-public information such as the bank’s top 20 borrowers, exposure, provisioning, and details of non-performing assets. They are expected to submit their final financial bids by the end of February with the entire transaction poised to be completed by the first half of the next financial year (FY26).

 

As per the disinvestment protocol, following the due diligence phase, a draft share purchase agreement will be shared with the bidders. Subsequently, financial bids will be submitted, and a reserve price for the transaction will be set. This reserve price will remain confidential and undisclosed to the bidders.

 

IDBI Bank’s financial turnaround

IDBI Bank, which exited the Reserve Bank of India’s prompt corrective action framework in 2020-21, has shown a remarkable financial turnaround. The bank's deposits grew to Rs 2,77,657 crore in FY24, up from Rs 2,33,134 crore in FY22, while net advances rose to Rs 88,621 crore from Rs 1,45,772 crore in the same period. Its profit after tax more than doubled to Rs 5,634 crore from Rs 2,439 crore.

 

In compliance with the Securities and Exchange Board of India’s (Sebi) minimum public shareholding norms, which mandate at least 25 per cent public ownership for listed companies, the government has applied for reclassification of its shareholding as a public shareholder. IDBI Bank had been exempted from this requirement.

 

For the third quarter of FY25, IDBI Bank reported a consolidated net profit of Rs 1,908 crore, marking a 31 per cent increase from the Rs 1,458 crore reported in the same period last year. The bank’s Net Interest Income saw a 23.1 per cent year-on-year growth, reaching Rs 4,228.7 crore. Asset quality remained stable, with Gross Non-Performing Assets (NPA) at 3.57 per cent, slightly down from 3.68 per cent the previous year, and Net NPA at 0.18 per cent, compared to 0.2 per cent in the last quarter.

 

Additionally, earlier this week, the bank’s board approved the sale of its entire 854,000 shares in Pondicherry Industrial Promotion Development and Investment Corporation Ltd (PIPDIC), representing a 21.14 per cent stake in the associate company.