This Govt PSU Bank Will Be Sold To Private Investors Via ‘Bidding’: 1st Such Instance In India

DIPAM Secretary Tuhin Kanta Pandey on Wednesday said they are working on the Expression of Interest (EoI) and would soon invite preliminary bids from investors for the privatisation of IDBI Bank.

Stake holding

The Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank in May 2021.

Currently, the government holds 45.48 per cent and Life Insurance Corporation of India, which is currently the promoter of the bank, owns a 49.24 per cent stake.

Pandey said that the government had been at this process for a long time. 

Bank out of corrective action

“It is also a first of its kind transaction where through a bidding route we will be privatising a bank”, he said.

As the bank has come out of the Prompt Corrective Action (PCA) framework its performance has improved which would appeal to investors.

RBI in March 2021 removed IDBI Bank from its enhanced regulatory supervision PCA framework after nearly four years of improved financial performance.

The government, along with LIC, will decide on the quantum of stake that they will sell in IDBI Bank before seeking initial bids. 

The quantum is expected to be outlined in the EoI.

Divestment target

The government has set a target of Rs 65,000 crore from divestment in 2022-23 (April-Mar).

So far it has already raised Rs 24,544 crore, majority of which is because of the LIC IPO this May.

The insurer’s shares were listed at a discount at Rs 865 to the initial IPO price of Rs 949 per share.

Shares down

Since then, it has been trading below the issue price, closing at Rs 663.20, down 1.04 per cent on Wednesday.

Pandey said the insurance company is taking a number of steps to improve its topline and bottomline.

“The management is taking post-listing initiatives for eg: re-engineering process to improve 13-month and 25-month consistency where LIC has been relatively less than peers. 

LIC has been bringing new professionals in areas like investment relation, Chief Development officer, Chief Technology Officer, cash management, looking into actuarial valuation and regular IEV (Indian Embedded Value) disclosures,” he said.