Investors, Foreign Banks Can Acquire IDBI Bank By September 2023; Govt Will Not Interfere In Operations?

The privatization of IDBI Bank will reportedly begin by March and is expected to end by the next financial year. 

Investors, Foreign Banks Can Acquire IDBI Bank By September 2023; Govt Will Not Interfere In Operations?
Strategic disinvestment process for multiple PSUs is going on in parallel.

In 2019, LIC acquired a controlling stake in IDBI Bank and became the bank’s biggest shareholder. The bank was categorized by the RBI as a private-sector institution as a result of this development.

Government Invites Bids For IDBI From March

Presently GoI and LIC have 45.48% and 49.24% shareholding, respectively, in the bank. LIC is the bank’s promoter holding management control.

The Government and Life Insurance Corporation (LIC) had invited preliminary bids with the intent to sell 60.72% of IDBI Bank. details have also confirmed that December 16 is the last date to send in an Expression of Interest (EOI).

Once the EoIs are received, the interested companies must pass RBI’s “Fit and Proper” evaluation and receive security clearance from the Ministry of Home Affairs (MHA) before access to the data room may be granted to qualified bidders. Financial bids from bidders would only be submitted after due diligence.

It typically takes six months for the due diligence process to be finished and financial bids to be received. Inviting financial bids for IDBI Bank is something we expect to do by March, authorities said.

Given that this would be the first instance of a strategic sale of a bank, several questions are anticipated to be raised throughout the due diligence process. According to the officials, the strategic sale of IDBI Bank will probably be completed by September.

Who Can Submit Bids?

Bids may be submitted by private sector banks, foreign banks, non-banking financing firms registered with the Reserve Bank of India (RBI), Alternative Investment Funds (AIFs) registered with the Sebi, and funds or investment vehicles formed outside of India.

The minimum net worth requirement for bidders is still $22,500 crore, and they are required to provide net profit data for three of the previous five years. Additionally, 40% of the equity would need to be committed for 5 years.

In June 2022, the govt started floating Requests for Proposals (RFP) as the process of privatizing IDBI Bank gained speed.

The public stockholders own the final 5.2% of the shares. Following the completion of this strategic sale, the combined ownership of the government and LIC in IDBI Bank would drop from 94.72 percent to 34 percent.

Along with the transfer of management control, the government will sell a 30.48 percent stake and LIC will sell a 30.24 percent stake, bringing the total to 60.72 percent.

Officers and employees’ unions of IDBI Bank are concerned with the Central Government and LIC’s decision to sell their stake to private players.

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