IDBI Bank stake sale: RBI vetting process in last leg, report by month-end

The Centre is expecting the Reserve Bank of India’s (RBI’s) ‘fit and proper’ report on the potential bidders of the IDBI Bank by the end of this month, official sources said.

The central bank is in the final leg of concluding its vetting process, which would help speed up the sale of the majority stake in the lender, they said.

At least four potential bidders have submitted their initial bid to acquire a majority stake in the bank. 

“All potential bidders are learnt to have met the ‘fit and proper’ criteria of the RBI except one, which happens to be a foreign bidder, an official source told Business Standard. 

“Being a critical sector, RBI assessment was bound to go longer than usual. Typically, it takes 12-18 months to clear the process,” he said.

The central bank’s clearance will be seen as an important milestone for the bank’s strategic disinvestment.

The government has received the expression of interest (EoI) from multiple bidders on January 2, 2023. Once RBI clears it, the eligible bidders will do their due diligence on the bank. 

As part of the process, the bidders would be given access to the banks’ virtual data room for a better understanding of the business of the bank and will clarify doubts if any, the official said. 

The bidders would also review the draft share purchase agreement (SPA), which outlined a series of precedent-defining requirements, including regulatory approvals, that the government and promoter LIC would need to fulfill. 

Following this, the government would call for financial bids. 

Sources said the government is aiming to conclude the IDBI stake sale in the current financial year. 

LIC and the government will need to divest a substantial stake in IDBI Bank, if not exit the bank completely, to attract credible bids. 

On October 7, 2022, the Centre invited EoIs for IDBI Bank and offered to sell a total of 60.72 per cent stake in the bank, including 30.48 per cent from the government and 30.24 per cent from LIC, along with the transfer of management control in the bank. 

After the sale, the government and LIC together will have a 34 per cent residual stake in the lender. 

To make the transaction smooth, the government has sought exemptions on the ownership cap for individual shareholders and private equity investors in private sector banks and also the 40 per cent lock-in for promoters for five years.

The government has also sought clarity from RBI on which type of entities can form part of the bidder’s consortia. The exemption from minimum public shareholding has been also widened to cater to disinvestment.

In full swing
 

Four potential bidders submit initial bids to acquire majority stake in IDBI

All, except one bidder, meet RBI’s ‘fit and proper’ criteria 

Bidders to be given access to the bank’s virtual data room as part of process

Centre aiming to conclude the stake sale this financial year