Govt eyes IDBI financial bids by June, stake sale completion in FY24 itself

Govt has made several provisions and brought regulatory clarity to make deal attractive for bidders. These include allowing a consortium of foreign entities to own over 51% in the Bank

The strategic sale of stakes held by government and state-owned Life Insurance Corp of India (LIC) in IDBI Bank is expected to move to the second stage by the first quarter of FY24, said two people in know.

They added that looking at the progress in the ongoing deal, financial bids are expected to come in by June.

The proposed IDBI stake sale is divided into two stages. In the first, an expression of interest (EOI) is invited, followed by a 'Fit and Proper' assessment and security clearances.  

The second stage is where qualified bidders will be provided with the Request for Proposal (RFP) document and further details of IDBI Bank, so that they can submit financial bids on the terms set out in the RFP.

“The concerned regulatory authorities and ministries, including the Reserve Bank of India and the Ministry of Home Affairs (MHA) are scrutinising the documents submitted by potential bidders," said the people cited above.

The process is time-consuming as it requires a lot of paperwork and all departments are coordinating and examining it at their levels, they said.

For instance, two sets of clearances—security from MHA and Fit and Proper from the RBI—are running parallel.

     

“Once both are cleared, the bidders will qualify for the second round. Subsequently, they will be taken to the virtual data room to sign the non-disclosure undertaking. Then they can do due diligence and draft agreements will be shared," one of the persons cited above explained.

     

On whether global uncertainties will have an impact on the disinvestment process, one of the sources said that external headwinds have always been an area of concern as they impact investor sentiment. However, the government is moving ahead keeping all factors in mind, one of the two persons said, adding that the government is confident of completing the stake sale in fiscal year FY24, and is unlikely to defer the deal.

The Department of Investment and Public Asset Management (DIPAM), the nodal department responsible for disinvestment, had received multiple bids for the proposed 61 per cent stake sale and transfer of management control in IDBI Bank.

A consortium of private equity funds, a foreign financial services firm, a global bank, and a non-banking financial company (NBFC) are among those that have submitted bids.

The government and Life Insurance Corporation (LIC) are selling 60.72 per cent stake in IDBI Bank, for which they had invited bids in October. The last date was set at December 16, but was later extended to January 7.

The government has made several provisions and brought regulatory clarity to make the deal attractive for potential bidders. These include allowing a consortium of foreign funds and investment companies to own over 51 per cent in IDBI Bank. The Centre clarified that the foreign ownership norms were for new private banks, not for existing ones like IDBI Bank.

It also made a clarification with respect to norms applicable to public-sector banks and said the rules would not apply to IDBI Bank after the government and LIC sold their stakes, even though they would continue to hold about 34 per cent jointly.

The government also said that IDBI Bank will operate as a private bank, even if it were to be taken over by a foreign bank.

In addition, the new acquirer must ensure compliance with the minimum public shareholding (MPS) requirements within a year of the sale.

Stake Sale Progress 

The 60.72% stake in IDBI Bank is being sold by the government and LIC

EoI received on January 7

Domestic as well as foreign investors have shown interest in the deal 

RBI, MHA fit & proper; regulatory clearances underway 

The deal involves two sequential stages; financial bids is part of the second stage

Govt aims to complete the  stake sale in the next fiscal year