The government on Tuesday invited proposals to appoint legal and transaction advisers for the strategic disinvestment of IDBI Bank Ltd, boosting efforts to meet its ambitious ₹1.75 trillion disinvestment target for this fiscal year.
The proposal was approved by the Cabinet Committee on Economic Affairs in May. It involves the sale of a majority stake in the bank jointly by the government and Life Insurance Corporation of India (LIC), along with management control.
While the transaction advisor will be required to undertake tasks related to all aspects of the proposed disinvestment, culminating in the successful completion of the transaction, the legal adviser will review and advise on all legal contracts and the regulatory norms and assist in securing approval and exemptions, wherever necessary. Interested parties can submit bids till 13 July.
The Union government and LIC own 45.48% and 49.24%, respectively, in IDBI Bank, giving them a combined stake of more than 94%. LIC is currently the promoter of IDBI Bank with management control after the government sold its majority stake to the state-run insurance giant in 2019.
However, the government and LIC may not fully sell their stakes and instead retain minority holdings post the strategic disinvestment. “The extent of respective shareholding to be divested by GoI and LIC shall be decided at the time of structuring of transaction in consultation with RBI,” the cabinet secretariat had said in a statement.
IDBI Bank last month reported a full-year profit for the first time in five years at ₹1,359 crore for FY21. The lender had reported a loss of ₹12,887 crore in fiscal 2019-20. In the fiscal fourth quarter, the bank, which came out of the Reserve Bank of India’s prompt corrective action (PCA) framework in March, reported nearly a fourfold jump in net profit to ₹512 crore due to tax refund and higher net interest income. It had a year-ago net profit of ₹135 crore.
LIC’s board has passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank by divesting its stake along with strategic stake sale envisaged by the government with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policyholders.
The government expects a strategic buyer to infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank and generate more business without any dependence on LIC and government assistance. “Resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programmes of the government benefiting citizens,” the Cabinet statement said.
