The sale of IDBI Bank is underway as transaction advisers will soon be appointed.
Fast Tracking Of IDBI Sale
The Cabinet Committee on Economic Affairs (CCEA) has already approved IDBI Bank’s divestment and management control transfer.
With the developments of CCEA’s clearance and legislative provisions in place, the IDBI Bank sale is already going at a faster pace than the other 2 banks the government has earmarked for privatisation.
The privatisation process of 2 other banks is awaiting legal amendments in order to proceed.
The Stakeholders And Percentage They Own
The government of India (GoI) along with LIC will dilute a certain extent of their stake which will be determined after consultation with RBI on the deal structuring.
LIC, presently IDBI Bank’s promoter, holds a stake of 49.24% and the GoI, presently the co-promoter, holds 45.48% stake.
A request for proposal will be issued soon for appointing advisors.
The transaction will then proceed no later than this month and roadshows will be held to garner an effective response.
The Duties Of The New Buyer
The new buyer will have to contribute with funds infusion, new tech and implementation of best management practices in the interest of growth of IDBI Bank.
It will also have to generate more business without relying on LIC or the GoI for funds .
IDBI’s History Of Poor Performance And Selection For Privatisation
The RBI took IDBI Bank out of the prompt corrective action (PCA) framework in March after it was placed in May 2017.
The decision was made due to financial underperformance which led to RBI placing restrictions on expansion, investments and lending.
IDBI was always the centre of the government’s attention when it came to privatisation but increasing losses and bad loans complicated matters.
However, the bank has made a turnaround of sorts with a decline in net non-performing assets (NPA) to 1.97%.
It has a capital adequacy ratio of 15.59% as last reported in March.
LIC is expected to file an IPO in the Jan-Mar quarter of 2022.
This will expectedly be the biggest listing in the history of the Indian capital market.
The IPO will require a lot of time with regards to valuating the corporation and due diligence which could extend the timeline upto Feb-Mar 2022.