The Centre on Saturday received multiple expressions of interest (EoIs) from domestic and foreign investors for the 60.72% stake in IDBI Bank, which will go to the successful bidder along with management control.
“Multiple expressions of interest received for the strategic disinvestment of Govt and LIC stake in IDBI Bank. The transaction will now move to the second stage,” department of investment and public asset management secretary Tuhin Kanta Pandey tweeted.
Saturday was the last date for submission of EoIs. In the second stage, shortlisted bidders would be asked to place financial bids. The transaction is expected to conclude in FY24.
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“The financial bids will be called after all the processes are completed such as due diligence of EoIs, fit-and-proper assessment of the bidders by the RBI and data room access given to the shortlisted bidders,” a senior official told FE.
On October 7 last year, the Centre invited EoIs for IDBI Bank and offered to sell a total of 60.72% stake worth over `38,550 crore at current market prices, comprising 30.48% from the government and 30.24% from LIC, along with the transfer of management control.
The deal was sweetened for investors as the government, market regulator Sebi and the RBI have extended necessary regulatory forbearance. Foreign banks, funds and investment vehicles incorporated outside India are allowed to bid for IDBI Bank.
These include an extended period for complying with the minimum public shareholding (MPS) norms and relief from tax on notional gains if share price of the bank rises post financial bids up to transaction conclusion.
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Also, the buyer will make open offer to public at the winning bid price (no additional cost even if share prices rise).
IDBI Bank shares closed at Rs 59.05 on BSE on Friday, up 7.85% from the previous closing price, while the broader Sensex closed 0.75% down.
On Thursday, the Securities and Exchange Board of India (Sebi) allowed the Centre to reclassify its holding in IDBI Bank as ‘public’ following the divestment of its stake, on the condition that its voting rights do not exceed 15%. The regulator also said the buyer will have to adhere to the minimum public shareholding norms of 25% within a year of acquisitions, as per its regulations applicable in merger and acquisition transactions.
However, another government official said that the one-year period for MPS compliance intimated by Sebi would not be applicable for IDBI Bank as the Centre amended the Securities Contracts (Regulation) Rules, 1957, on Tuesday to give a longer period to the buyer.
The public holding in IDBI Bank is 5.28%.
Sebi’s categorisation of the Centre’s residual stake of 15% in the lender would mean that the new promoters of the bank would have to just offload another 7-10% to meet the public float norm of 25%. A strategic investor may not like to offload a stake in the initial years, a period when it will likely be setting up a new management team, restructuring the business and attempting a rebranding of a company.
The winning bidder will also be permitted to make an open offer to the public at the same price that it would be paying to the government and LIC, thereby reducing potential additional costs in the event of the bank’s share prices moving upwards after financial bids are submitted. Also, even if the share prices rise after financial bids are submitted and by the time the transaction concludes, there won’t be any tax liability on the notional gain in value to the buyer, sources said.
The IDBI Bank strategic disinvestment would give the government a ready reckoner to undertake strategic disinvestment of public sector banks.