Government Invites Expression Of Interest For IDBI Bank

The government has invited expression of interest for a stake sale in IDBI Bank.

Investors could look to bid for a 60.72% stake in IDBI Bank through this process, along with transfer of management control, according to a notification on the Department of Investment and Public Asset Management’s website.

While the government will offload a 30.48% stake in the bank, Life Insurance Corp. will sell 30.24%, the notification said. The deadline for submission of EOIs is set for Dec. 16.

LIC currently holds 49.24% in IDBI Bank, while the government owns 45.48%.

The process, according to the EOI document, will allow bids from private banks, foreign banks, non-bank finance companies, alternative investment funds and funding or investment vehicle incorporated outside India. Interested bidders may participate individually or as a consortium, the document said.

The process allows up to four entities to form a consortium. The lead member of the consortium must have a minimum stake of 40%, while the remaining members cannot have less than 10% holding each in the consortium.

If any of the members of a consortium is ineligible or disqualified, all the members will automatically stand disqualified and considered ineligible.

The bidders will be subject to the Reserve Bank of India’s fit and proper assessment and will need to be compliant with all regulatory requirements. The selection of qualified investors and the amount of equity stake that such entities would be permitted to acquire over and above the thresholds specified, will be at the sole discretion of the RBI and subject to such conditions as may be imposed by the central bank.

Bidders must have a minimum net worth of Rs 22,500 crore as on March 31, 2022 for Indian participants, or Dec. 31, 2021 for foreign participants. The bidder must have reported a net profit for at least three out of the last five financial years.

Notwithstanding the shareholding that may be permitted by the RBI from time to time, the voting rights shall be limited to a ceiling of 26%, as prescribed by RBI. This ceiling will also apply to consortium investors, the document said.

The successful bidder, whether a sole entity or a consortium, is required to hold and lock-in, either directly or through an investment vehicle or non-operating financial holding company, at least 40% of the paid up and voting equity share capital of IDBI Bank, for five years from the date of acquisition.

The new promoter of the bank will also have 15 years to meet the RBI's maximum shareholding norms of 15%.

KPMG is acting as the transaction adviser, while Link Legal is the legal adviser to the government.

The stake sale at IDBI Bank has seen considerable delays, owing to difference of opinion between the government and the banking regulator on the structure of the transaction. IDBI Bank had exited the RBI’s prompt corrective action framework in March 2021.