Business Standard Report: DIPAM receives 167 queries from 9-10 serious bidders on IDBI sale

8 Dec 2022 , 08:20 AM

About the proposed stake sale and transfer of management control of IDBI Bank, the Department of Investment and Public Asset Management (DIPAM) has received 167 inquiries from at least 9—10 prospective serious bidders. That demonstrates a keen interest in the put-forth transaction.

“A number of bidders have sent the department several inquiries. These questions covered a wide range of topics, including regulatory fit and correct evaluation, residence restrictions, eligibility requirements, corporate reorganization, and other business-related topics. The department made an effort to address and explain every question that serious bidders had regarding the planned expression of interest (EoI), according to a department official who talked to Business Standard. The stake auction is receiving a tonne of interest from bidders.

Apart from several domestic companies, reports claim that at least three private equity firms, one international bank, and a few alternative investment funds (AIFs) have inquired about the potential deal and the EOI.

On October 7, the government issued a request for proposals for privatizing IDBI Bank. The Centre said that together with LIC, they will sell a total of 60.72% of the financial organization.

The official told Business Standard, “Interested bidders, either an individual entity or a consortium of foreign funds, can own up to 60% of the bank, that’s what the invite for an EoI will offer.” He or she continued by saying that the government and the Reserve Bank of India (RBI) would continue to address the concerns voiced by potential bidders throughout the process.

On Tuesday, DIPAM announced that it would permit a group of foreign funds and investment firms to control more than 51% of IDBI Bank, making it clear that the criterion for foreign ownership only applied to newly established private banks.

The clarification should make it possible for alternative investment funds (AIFs) and private equity funds to acquire the majority stake in the private sector lender, as present regulations ban foreign ownership.

Even though the government and LIC will continue to own approximately 34% of the bank after selling their holdings, the department clarified this week that some regulations that apply to public sector banks would not apply to IDBI Bank.

In addition, the government has stated that IDBI Bank will continue to operate as a private-sector bank even if a foreign bank were to acquire it.

In response to inquiries about the minimum public shareholding requirement, which mandates that a listed business have a public float of 25%, the government stated that the issue is being looked into, along with the compliance transition period.

There are two stages to the IDBI share sale. Those bidders who initially qualify will be permitted to participate in the RBI-mandated “fit and appropriate” assessment in the first round. The Ministry of Home Affairs will then have to provide their approval.

The eligible bidders would then move on to the second stage, where monetary bids would be requested.

By March 2023, DIPAM intends to issue a financial bid invitation. By the middle of the upcoming fiscal year, the deal is anticipated to be finalized.

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