After much waiting, IDBI Bank is likely to be headed towards privatisation soon. DIPAM (Department of Investment and Public Asset Management) secretary Tuhin Kanta Pandey has confirmed that the bank will be privatised through a bidding route.
As per the DIPAM secretary, the Centre is preparing an expression of interest (EOI), following which preliminary bids will be invited from investors. "It is also a first of its kind transaction where through a bidding route we will be privatising a bank," says Pandey, as reported by a news agency.
IDBI Bank's shares fell 0.43% to ₹46.15 today. The government has put IDBI Bank stake sale on a fast track to meet the divestment target for the current financial year. It also liberalised the railways land leasing policy this month, by slashing the fee to 1.5% from 6% earlier, which will allow it to divest a stake in Container Corp. of India Ltd (Concor).
In May last year, the Cabinet Committee of Economic Affairs (CCEA) had given approval to the government and LIC to sell 100% of their entire stakes in IDBI Bank, along with a transfer of management.
According to reports, the central government and LIC may sell up to 65% stake in IDBI Bank to a private buyer. However, there is no official confirmation about stake sale in the public sector lender. Both parties will take a decision on stake sale after due diligence with the Reserve Bank of India.
The IDBI Bank stock has today performed in line with the market, with BSE benchmark Sensex down by 0.41% at 60,123.54, while the Nifty is down 0.38% at 17,935.35. The stock, which has fallen after three days of consecutive gain, saw a decent rally in the past year. It has risen 3.95% in the past five days; 14.39% in the past month; 7.84% in the past six months; and 17.45% in the past year.
The Centre and LIC are planning to sell up to 65% stake in IDBI Bank to a private buyer. However, the extent of respective shareholding to be divested by the Centre and LIC could be decided at the time of structuring the transaction in consultation with the Reserve Bank.
The bank's shareholding pattern shows insurance major LIC of India as a majority stakeholder with a 49.24% equity share, while the government of India as a co-promoter at 45.48%, together accounting for about 94% stake in the bank. LIC is currently the promoter of IDBI Bank with management control and the government is the co-promoter. The state-owned insurer first acquired the stake in debt-laden IDBI Bank in 2018 and over the years it raised its shareholding to become a majority stakeholder.
Prime Minister Narendra Modi-led cabinet had approved the infusion of ₹4,557 crore by the government in financially-troubled IDBI Bank in September 2019. The move was aimed at helping in completing the process of IDBI Bank’s turnaround and enabling it to return to profitability and normal lending. LIC had bought a 51% stake in the bank for ₹21,624 crore at an average price of ₹61 apiece.
It is also planning to invite EoI for strategic disinvestment in state-owned companies Bharat Earth Movers Limited (BEML) and Shipping Corporation of India (SCI). In the current financial year, the government raised ₹24,544 crore through disinvestment in PSU units against a full-year budget target of ₹65,000 crore.