Pointing towards market volatility and investors’ shaky appetite for risk, Tuhin Kanta Pandey, secretary in the Department of Investment and Public Asset Management, told Reuters on Tuesday that the Indian government should have a moderate divestment target.
The government has set a ₹65,000 crore divestment and privatisation target for financial year 2022-23, out of which it has raised ₹24,544 crore in the first seven months of the fiscal.
Prime Minister Narendra Modi has been trying to privatise a number of state-run companies since he came to power in 2014. But the government has had only a few successes such as the sale of the country’s flag carrier Air India to conglomerate Tatas.
The government had first announced a plan to sell IDBI Bank in 2016 but eventually shuffled the stake to its own insurance behemoth Life Insurance Corporation (LIC).
Earlier this month, the government along with LIC invited Expression of Interest (EoI) for selling 60.72% stake in IDBI Bank. However, it barred large industrial houses from participating in the strategic sale.
The last date for putting in EoI for IDBI Bank is 16 December.
The financial bids process will likely be completed by the end of March 2023 and finally conclude the strategic sale by early next fiscal beginning April next year.
The net worth threshold for bidders has been kept at ₹22,500 crore, and they must report net profit in three of the past five years. Besides, 40% of the equity would have to be locked in for five years.
At present, LIC holds 49.24% stake in IDBI Bank, while the government holds 45.48% stake. The remaining 5.2% stake is with the public shareholders.
The combined stake of the government and LIC in IDBI Bank would come down from 94.72%, to 34% after the conclusion of this strategic sale.
The government will sell 30.48% stake and LIC will offload 30.24%, taking the totalling to 60.72%, along with transfer of management control.
In case, the bidder intends to amalgamate IDBI Bank with itself, the government and LIC will vote for such amalgamation or merger at the board or shareholder meetings.
A successful majority stake sale of IDBI Bank to a private entity would mark the first such deal in the Indian banking space through a competitive bidding process, setting the stage for more such sales in the coming years.
In February, the government had announced an intent to privatise two other state-owned lenders but the process is yet to begin. (Live Mint)
