IDBI Bank privatisation process: Here's all we know so far

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Indian Market
by 5paisa Research Team Last Updated: 2022-12-10T08:45:48+05:30

After the government and the Life Insurance Corp sell most of their stake in IDBI Bank, the lender will be considered a ‘private sector’ bank, the finance ministry has said. 

The government will continue to hold a 15% residual stake in the bank even after it is sold to another buyer.

What more has the finance ministry said about the stake sale?

An ‘appropriate dispensation’ for the new owner to achieve minimum public shareholding (MPS) over an extended period is under consideration and the winning bidder will have no restriction on undertaking corporate restructuring of the subsidiaries of IDBI Bank, the ministry said.

How far has the process of divesting IDBI Bank come?

The government had on October 7 invited bids for privatising IDBI Bank and said that it together with LIC will sell a total of 60.72% stake in the financial institution.

The last date for putting in Expression of Interest (EoI) or preliminary bids is December 16.

What is the current ownership structure of IDBI Bank?

The government and LIC together hold 94.72 per cent stake in IDBI Bank. The successful bidder would be required to make an open offer for acquisition of 5.28 per cent public shareholding.

Pursuant to the transaction, the government will own 15 per cent stake and LIC 19 per cent shareholding in IDBI Bank, taking their total holding to 34 per cent.

What more has the government clarified on the disinvestment of IDBI Bank?

The government has said the aspects in respect of treatment of its residual shareholding and the appropriate transition period for minimum public shareholding compliance are under due consideration and would accordingly be communicated to the QIPs at the request for proposal stage.

Under SEBI’s minimum public shareholding norms, listed entities need to have at least 25 per cent public shareholding, subject to certain conditions.

On whether IDBI Bank will be reclassified as a wholly-owned subsidiary in the event that the successful bidder is a foreign bank, the government said, “The Target (IDBI Bank) shall post consummation of the transaction continue to function and operate as an Indian private sector bank.” 

Investors also sought clarification whether corporate restructuring (including merger and demerger) is permitted for subsidiaries of IDBI Bank.

“Subject to extant RBI regulations/directions and other requirements as RBI or respective regulator may stipulate, there are no restrictions under the PIM for undertaking any corporate restructuring for the subsidiaries of IDBI Bank, post consummation of the transaction,” the government said.

PIM stands for preliminary information memorandum.

What are the various subsidiaries of IDBI Bank?

IDBI Bank has subsidiaries like IDBI Asset Management, IDBI Trusteeship Services and IDBI MF Trusteeship Company.

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