According to news reports, IDBI Bank is selling its portfolio of legacy stressed assets to Omkara Asset Reconstruction Company (ARC) for ₹6,151 crore in an effort to help the government obtain a higher valuation for the planned sale of its stake in the lender.
Omkara ARC outbid the government-sponsored National Asset Reconstruction Company Ltd (NARCL) with the highest offer of ₹652 crore during the inter-se auction that took place on Saturday, August 3. The sale of the impaired portfolio represents a 10.5% recovery for IDBI Bank, which will be shown in its second-quarter profits.
Without much progress, talk of the government selling a portion of its bank holdings has been going about for more than two years. The government announced in May 2021 that the Cabinet had approved the sale of its and LIC’s strategic interests in IDBI, and in October 2022 it called for expressions of interest from potential buyers.
The Life Insurance Corporation (LIC) owns 49.24% of the bank, while the government owns 45%. They have offered to sell a private party a 60.7% stake, subject to a gradual reduction to 26% of the stake. The Reserve Bank of India (RBI) has authorized Fairfax Financial Holdings, Emirates NBD, and Kotak Mahindra Bank as prospective bidders, according to a Reuters story published last week.
Prior to this stake sale, IDBI Bank had listed a ₹6151 crore legacy stressed portfolio, consisting of 239 accounts, on the market. This portfolio is kept in the Stressed Asset Stabilization Fund (SASF), a division that was separated from the term lending institution upon its merger with the bank in October 2006.
The bank had established a reserve price of ₹642 crore and was inviting offers from the ARCs for finance businesses. While Omkara ARC bid at the reserve price in the first round, NARCL offered a price that was somewhat higher than the ₹642 crore set aside. During the IDBI Bank-managed international bidding procedure, Omkara ARC made an offer that was ₹10 crore greater than the reserve price.
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