Centre to fully exit IDBI Bank once it gets ‘upside value’: Dipam secy

The government will soon notify the exemption period for meeting the public-shareholding norm for the prospective owner of IDBI Bank, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey told Business Standard.

He said the government would make a complete exit from IDBI Bank when it received the “upside value” on the remaining stake after acquisition.

He said the government had received interests from both global and domestic investors to acquire a majority stake in the bank in the first such transaction in the banking sector. The senior bureaucrat expects to close the deal by September-October.

“We have to decide now on the time period. We can’t go on making changes after we decide on changing hands. At a certain stage of the deal we will give it. It will be notified for what period they (the new owners) are exempt,” he said.

Indications are the notification might come before inviting the financial bids for the deal.

The government had recently notified it reserved the right to exempt public-sector enterprises from the minimum public shareholding norm even after a change in ownership.

Following this, the Securities and Exchange Board of India (Sebi) allowed the Central government to classify its stake in IDBI Bank as “public” but also directed that the new buyer should comply with public-float norms within a year of the sale.

The senior bureaucrat was of view that even though IDBI Bank was exempted till 2024 and the rule recently clarified that public float exemption would continue in case of a change in ownership, clarity should be given.

On Sebi’s condition on meeting minimum public shareholding in a year, Pandey said it was a standard and generic rule and applied to all listed entities — private or public — whenever there was a new acquirer.

Complete exit from IDBI

He said that the government intended to exit IDBI Bank completely as “we are not into the commercial business of banking”, but there was no timeline or road map being committed to the acquirer on the exit plan. “The exit plan will depend on when we could be able to monetise the partial stake,” Pandey said.

At present, the government is looking to sell 30.48 per cent and LIC 30.24 per cent stake, aggregating to 60.72 per cent of the equity share capital of IDBI Bank. After this stake sale, the combined shareholding of LIC and the government will come down to 34 per cent.

Good response to IDBI EoIs

On the expressions of interest (EoIs), the secretary said the preliminary bids had received a good response. He said the process had moved to the second phase, which includes due diligence of the EoI and an assessment of the Reserve Bank of India’s fit and proper process. Saturday was the deadline to submit first bids for buying a stake in the lender.

Sources said at least five entities had submitted their bids.

On valuation, he said in a competitive bidding process, “we want non-collusive bidding. We do not want the bidders to know who the other bidders are. We want the best price for them for our shares. Therefore, I think the process runs like where nobody knows who else is there. On arriving at pricing, that’s the process we decide after inviting financial bids, keeping in mind fluctuations in the market price”.