IDBI Bank investors receive security clearance; await RBI approval

Central government and LIC are set to divest 61% stake amid strategic disinvestment drive. The govt aims to generate Rs 50,000 crore through asset monetisation this fiscal year

Prospective investors in IDBI Bank have received necessary security clearance from the Home Ministry, and approval from the Reserve Bank of India (RBI) is anticipated shortly, according to a report by news agency PTI.

The Indian government, in conjunction with the Life Insurance Corporation of India (LIC), is divesting nearly 61 per cent of its stake in IDBI Bank. This comprises a 30.48 per cent share from the government and a 30.24 per cent share from LIC.
 

In January 2023, the Department of Investment and Public Asset Management (DIPAM) disclosed that it had received multiple expressions of interest for acquiring a stake in IDBI Bank. At least four potential bidders have submitted initial bids for the majority stake in the bank, as earlier reported by Business Standard.

Clearance process and delays

The EoI process requires bidders to obtain two sets of clearances: one from the Home Ministry for security clearance and another from the RBI to meet the ‘fit and proper’ criteria. The RBI has been scrutinising the details submitted by potential investors for over 18 months, causing delays in the privatisation timeline of IDBI Bank.

“Security clearance for the potential bidders has already been received. The clearance from RBI is also expected soon,” an official told PTI. The government anticipates receiving the RBI’s ‘fit and proper’ report on potential bidders by the end of this month.

“All potential bidders are reported to have met the ‘fit and proper’ criteria of the RBI, except one, which is a foreign bidder,” a source had earlier told Business Standard. “Given the critical nature of the sector, the RBI’s assessment process was expected to take longer than usual, typically 12-18 months.”

The RBI’s approval will mark a significant milestone in the strategic disinvestment of IDBI Bank. Once the necessary clearances are obtained, investors will gain access to the data room, initiating the due diligence process.

Govt to raise Rs 50,000 crore stake sale

After the strategic sale, the combined stake of the government and LIC in IDBI Bank, currently at 94.72 per cent, will reduce to 34 per cent. The government aims to raise Rs 50,000 crore through disinvestment and asset monetisation in the current fiscal year.

IDBI Q1FY25 results

IDBI Bank reported a robust 40 per cent year-on-year (Y-o-Y) increase in net profit for the first quarter of FY25, ending on June 30, 2024. The net profit stood at Rs 1,719 crore, up from Rs 1,224 crore in Q1 FY24. This growth is attributed to a significant reduction in provisions and taxes, which fell by 80 per cent Y-o-Y to Rs 356 crore in Q1 FY25 from Rs 1,795 crore in the same quarter of the previous fiscal year.

As the strategic disinvestment process progresses, these financial results highlight IDBI Bank’s improving profitability and operational efficiency, potentially making it an attractive investment for prospective buyers.