State-owned insurance behemoth LIC is expected to recover its ₹21,624 crore investment it had made in IDBI Bank as share prices are likely to rebound to 2019 levels by the time the lender is privatised, an official said.
The official said that since the commencement of the IDBI Bank privatisation process in May last year, the share price has jumped from ₹35 a share to ₹45 a piece currently.
“We are expecting IDBI Bank scrip to move up further. The price is expected to move up closer to the price at which LIC had picked up stake in 2019,” the official told PTI.
The government and Life Insurance Corp (LIC) together hold 94.72 per cent in IDBI Bank. Of this, LIC’s holding is 49.24 per cent, while the government holds the rest 45.48 per cent stake. Public shareholders hold 5.28 per cent.
LIC had bought a 51 per cent stake in IDBI Bank in 2019 for ₹21,624 crore at an average price of ₹61 per share. Following a QIP issue in December 2020, the stake of LIC came down to 49 per cent.
Besides, the government and LIC together infused ₹9,300 crore in IDBI Bank to bring it out of RBI’s Prompt Corrective Action (PCA) framework.
“IDBI Bank privatisation will be a win-win for both the government and LIC,” the official added.
Shares of IDBI Bank closed at ₹44.95, up 2.16 per cent over previous close on the BSE.
At the current market price, sale of 61 per cent stake would fetch about ₹29,000 crore to the exchequer.
The announcement of IDBI Bank privatisation was first made in the Union Budget of 2021-22, following which the Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in May 2021.
On October 7, 2022, the government invited EoIs from investors for buying 60.72 per cent stake, along with management control, in IDBI Bank and set December 16 deadline for submitting preliminary bids.
The Department of Investment and Public Asset Management (DIPAM), while inviting Expressions of Interest (EoI) from potential investors, said that the potential investor should have a minimum net worth of ₹22,500 crore, must report net profit in 3 out of the past 5 years to be eligible for bidding for IDBI Bank and a maximum of 4 members would be allowed in a consortium.
The successful bidder would be required to mandatorily lock-in at least 40 per cent of the equity capital for 5 years from the date of acquisition.
It further said that the selection of the qualified interested parties and the amount of equity stake of such entities in IDBI Bank would be decided by the Reserve Bank and the bidder would have to clear the ‘fit and proper’ assessment done by the banking regulator.
It also barred large industrial/corporate houses or individuals from participating in the bidding process.
