IDBI Bank’s potential suitors have been granted confidential data access to carry out due diligence on the lender after a 12-month hiatus, during which their applications underwent government scrutiny, said people familiar with the matter.
The development marks a step forward in the disinvestment process, through which the Union government and Life Insurance Corporation (LIC) are looking to sell 60.72% stake in the lender. They collectively own 95% of the bank.
The suitors – Fairfax Financial, Emirates NBD, Oaktree Capital and Kotak Mahindra Bank – had submitted expressions of interest in January last year, the people said.
“The bidders have been given access to a data room, hosted through a cloud, and are privy to all material non-public information including details such as top 20 borrowers, exposure, provisioning made and bad loans, besides other details,” said an official, who did not wish to be identified. “It is expected that this window will be closed by the end of February and, accordingly, bidders will be submitting their bids.”
Although an attempt will be made to obtain financial bids by the end of this financial year, the deal is expected to be closed in the first half of the next fiscal, said the people.
Queries emailed to Fairfax Financial and Kotak Mahindra Bank remained unanswered. Emirates NBD and Oaktree Capital declined to comment.
As per the standard operating procedures for IDBI Bank’s disinvestment, the next steps after due diligence include sharing of a draft share purchase agreement with the prospective bidders. They will then submit their financial bids. After this a reserve price will be fixed for the transaction prior to opening of the bids. This price will remain confidential and will not be disclosed to the bidders.
IDBI Bank came out of the Reserve Bank of India’s prompt corrective action framework in 2020-21. Its financial performance has seen a turnaround ever since. From being a loss-making entity, it has turned into a profitable bank. Its deposits increased to ₹2,77,657 crore in FY24 from ₹2,33,134 crore in FY22. Net advances increased to ₹1,88,621 crore from ₹1,45,772 crore during this period, while its profit after tax more than doubled to ₹5,634 crore from ₹2,439 crore.
The Centre disclosed that it has applied for reclassification of its shareholding as a public shareholder. At present, both the government and LIC are classified as promoter shareholders.
Minimum public shareholding norms imposed by the Securities and Exchange Board of India require a listed company to have at least 25% public ownership. IDBI Bank was exempted from this.
Source: Economic Times