IDBI Bank divestment: Disinvestment transaction on track as per defined process, says DIPAM

The Department of Investment and Public Asset Management (DIPAM)  on Friday said that the speculations that the government might defer the $4 billion IDBI Bank divestment are misleading as privatisation transaction is right on track. Earlier in the day, a few news reports claimed that the Union government may defer the $4 billion IDBI Bank privatisation plan over concerns that the unprecedented market volatility may deter prospective buyers.

A report in Mint said that due to volatility in the market and fall in the stock price of IDBI Bank, the government might wait for the market conditions to stabilise before sealing the deal. It said that the government is thinking to defer the plan as it might get a lower than estimated value from the sale of the 60.72 per cent stake.

“The market volatility and the weakness in IDBI Bank’s stock means a much higher dilution in the government’s stake. The government may get a much lower value from the total 60.72 per cent stake sale than what it expected earlier. In such a circumstance, the government is thinking of putting the divestment plan on hold," an official familiar with the matter told Mint.

The Union government and LIC together own 94.71 per cent stake in the bank. The government owns 45.48 per cent of IDBI Bank, and is planning to divest a 30.48 per cent stake in the bank.

Whereas, insurance major Life Insurance Corp of India (LIC) plans to see a 30.24 per cent of its stake from its holding of 49.24 per cent in the bank.

Responding to the reports, DIPAM tweeted that reports appearing in a section of the media indicating the possibility of deferment of IDBI Bank disinvestment are misleading, speculative and baseless.

LIC is currently the promoter of IDBI Bank with Management Control and the government is the co-promoter. In 2019, LIC injected Rs 21,624 crore into the bank.

Earlier this year, the Centre received initial bids from multiple bidders. Financial bids for IDBI Bank will be called only after due diligence, DIPAM secretary Tuhin Kanta Pandey said.

The privatisation of IDBI Bank will be a first-of-its-kind deal for the Indian banking space as the government expects it to set the stage for the sale of two state-run banks.

Watch: Centre To Exit IDBI Bank: DIPAM Secretary

Before this, capital markets regulator Sebi allowed the government’s shareholding in IDBI Bank to be reclassified as “public" after its stake sale on condition that its voting rights do not exceed 15 per cent.

Reclassification of the government’s remaining 15 per cent shareholding in IDBI as “public" will make the task of meeting the mandated 25 per cent minimum public shareholding norm simpler for the new buyer.

The government’s intent to reclassify its shareholding as “public" must be specified in the offer document at the time an open offer is made by the new acquirer of the lender, Sebi said.

Also read: How ITC, IDBI Bank and 8 other shares with significant LIC holdings fared in 2023

Also read: Budget 2023: Government lowers divestment target to Rs 51,000 crore