Govt extends last date for IDBI Bank stake sale; stock rises 6%

Shares of insurance giant LIC-owned IDBI Bank rallied over 6% in early trade to hit a fresh 52-week high on Thursday, in an otherwise weak broader market, after the government extended the deadline to submit preliminary bids for the privatisation of the lender. The Department of Investment and Public Asset Management (DIPAM) on Wednesday revised the timeline to submit an Expression of Interest (EoI) for the privatisation of IDBI Bank to January 7, 2023, from December 16, 2022. Also, the deadline to submit physical copies of the EoIs has been extended to January 14, from December 23.

Reacting to the news, IDBI Bank share price opened a tad lower at ₹56.90, against the previous closing price of ₹57.25 on the BSE. The banking stock soon pared its losses and gained as much as 6% to hit a fresh 52-week high of ₹60.70, while the market capitalisation climbed to ₹64,622 crore. In comparison, the BSE Sensex was down 274 points at 62,403 levels, while the banking index, S&P BSE Bankex, was trading marginally lower.

IDBI Bank share price has almost doubled in the past six months, from its 52-week low of ₹30.50 on June 30, 2022, while it has risen 27% in the past one month. In the calendar year 2022, it surged 27%, whereas it gained 17% in the last one year. In the past one week, the counter added 3.5% as compared to 0.5% fall in the BSE benchmark Sensex.

The central government and LIC together plan to sell 60.72% shares in IDBI Bank and had invited bids from potential buyers in October. As part of the disinvestment plan, the Centre will offload a 30.48% stake in the lender, while the Life Insurance Corporation of India (LIC) of India will sell 30.24% in IDBI Bank. LIC and the government currently own 49.24% and 45.48% stake, respectively, in IDBI Bank, while the remaining 5.29% shares are owned by retail investors.

Following the stake sale, the government and LIC shareholding in the bank will decline to 34%, from the current 94.71%.

Earlier in October this year, the DIPAM had issued the preliminary information memorandum (PIM) for inviting expression of interest EoI for the bank. "It has now been decided that pursuant to the strategic disinvestment of IDBI Bank, government of India shall sell such number of shares representing 30.48% and LIC shall sell such number of shares representing 30.24%, aggregating to 60.72% of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank," said the PIM issued by the DIPAM.

As per the eligibility norms, private sector banks, foreign banks, non banking finance companies, Alternative Investment Fund (AIF) are eligible to participate in the strategic sale of IDBI Bank. The large industrial/corporate houses have been barred from the bidding process. The financial criteria for submitting the EoI and for being considered for the RFP Stage of the transaction, a minimum net worth of ₹22,500 crore is needed.

The Prime Minister Narendra Modi-led government has set a modest disinvestment target of ₹65,000 crore for the current financial year. The government has met one-third of the disinvestment target by selling 3.5% stake in LIC of India for ₹20,500 crore via IPO route. In a fresh development, the centre has proposed to sell 5% stake in Indian Railway Catering and Tourism Corporation (IRCTC), the ticketing and catering arm of Indian Railways, through an offer for sale (OFS), which may fetch ₹2,720 crore to the exchequer.