India will extend the deadline to submit expressions of interest for its stake sale in IDBI Bank to early next month from Dec. 16, a government source aware of the development told reporters in New Delhi on Friday.
This comes after the Indian government said it will allow a consortium of foreign funds and investment firms to own more than 51% in IDBI Bank. The current guidelines of the Reserve Bank of India restrict foreign ownership in new private banks. The central bank’s residency criteria for promoters applies only for newly set up banks and would not apply to an existing entity like IDBI Bank, the Department of Investment and Public Asset Management said in a response to interested bidders’ queries.
In October, the government had launched IDBI Bank’s privatisation process, offering private and foreign banks among others a majority 60.72% stake in the lender along with management control. The Cabinet Committee on Economic Affairs gave in principle approval for strategic disinvestment and transfer of management control in IDBI Bank in May 2021.
LIC currently has management control of the bank with a 49.24% stake. The government holds 45.48%, while the remaining 5.28% is with the public. The government will offload 30.48% and LIC 30.24%, adding up to 60.72%.
The successful bidder would be required to make an open offer for acquisition of 5.28 per cent of the public shareholding.
Interested bidders would have to clear RBI’s ‘Fit & Proper’ assessment and get security clearance from the government/home ministry in the EoI stage itself to be able to access IDBI Bank’s data room for due diligence.
The DIPAM had earlier said that potential investors should have a minimum net worth of Rs 22,500 crore, must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank.
Also, a maximum of four 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 five years from the date of acquisition.
While IDBI has been designated a private sector bank by the RBI, this will mark the first time that a lender majority owned by the government and state-run entities is being divested.
The government has set a target of ₹65,000 crore from divestment in 2022-23, of which it has raised ₹28,382.67 crore, mostly on account of the public market listing of LIC in May this year.
IDBI Bank came out of RBI’s prompt corrective action framework in the financial year 2020-21. It has posted ten successive quarters of profit starting from the January-March quarter of FY20.