Sumitomo Mitsui Banking Corporation Group (SMBC Bank) of Japan and Oaktree Capital Management are among those that have submitted expressions of interest (EoIs) for the strategic stake sale in IDBI Bank, said people aware of the matter. Oaktree is a US alternative assets firm founded by Howard Marks, one of the world’s most formidable distressed debt investors. The stake being sold is held by the Centre and state-owned Life Insurance Corporation of India (LIC).
“Multiple expressions of interest received for the strategic disinvestment of govt and LIC stake in IDBI Bank,” Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), had tweeted on January 8th. “The transaction will now move to the second stage. ” Pandey did not give specific names.
January 7 was the last date for submitting EoIs. The financial bids are expected to be invited by March end. There is no guarantee that those submitting EOIs will submit firm bids.
ET was the first to report on November 29 that Sumitomo Mitsui Financial Group and one other global bank were among five potential investors that have sought information about the sale of equity in IDBI Bank through a formal query process that closed on November 10.
Eligibility Criteria
It is widely believed a consortium, two foreign banks and a private equity firm are said to be among those that have submitted the paperwork. There is speculation that JC Flowers, Canada-based Fairfax group and Emirates NBD Bank may be interested.
Toshitake Funake, India CEO of SMBC, and spokespersons of Oaktree didn’t respond to queries sent on Saturday.
The government has said that the potential investor should have a minimum net worth of Rs 22,500 crore and have reported a net profit in three out of the past five years to be eligible to bid. A maximum of four members will be allowed in a consortium and the successful bidder will be mandated to lock in at least 40% of the equity capital for five years from the date of acquisition.
The government and LIC together are looking to sell 60. 72% in IDBI Bank and had invited bids from potential buyers last October.
The two together hold 94. 71% in the lender. The successful bidder will have to make an open offer for the acquisition of 5.28% of public shareholding.
The IDBI Bank stock has jumped 61% in the last six months in anticipation of a transaction. It closed on Friday flat at Rs 54.50.
The Securities and Exchange Board of India (Sebi) earlier in the month allowed the government to reclassify its shareholding in IDBI Bank as ‘public’ after a sale, making it easier for the new buyer to meet the 25% minimum public shareholding norm. The timeline for increasing the public shareholding in the lender will be specified in due course, the government said.’
The move was aimed at making the acquisition of state-run companies more attractive for investors, with IDBI Bank being the immediate beneficiary.
Oaktree Capital has been looking at Indian assets for a long time, including several distressed assets in NCLT. It was one of the key contenders in DHFL and had evaluated Reliance Capital as well before pulling out. In a recent interview, Marks, who cofounded Oaktree in 1995 with a strategy of investing in “good companies with bad balance sheets,” said the time is now right to snap up bargains in financial markets following a wide spread sell-off.
Over the years, Oaktree has emerged as a $164bn powerhouse of debt investing. The company does not publicly disclose its financial performance.
Sumitomo Mitsui Financial Group Inc (SMFG) plans to expand and beef up its operations, including its alliance with Jefferies Financial Group Inc., in Europe and Asia in a drive to strengthen its global investment banking business, its chief executive said recently. The second-largest Japanese lender bought nearly 5% of Jefferies last year to boost its leveraged finance and cross-border M&A advisory businesses in the US. The partnership has yielded six leveraged finance deals so far. In July 2021, SMFG had signed a pact to purchase a 74.9% stake in non-banking finance company Fullerton India Credit for about $ 2 billion. SMFG will eventually raise its stake to 100% in the shadow bank over a period of time. The acquisition gave SMFG access to a pan-India footprint across 25 states, 600 towns and 58,000 villages through 698 branches in India.
Source: Economic Times