Fresh developments suggest that the proposed strategic sale of IDBI Bank may not move forward, as financial bids submitted by potential buyers were reportedly lower than the reserve price. Sources indicated on Friday that the government could scrap the disinvestment process after evaluating the offers.
The government of India and Life Insurance Corporation of India (LIC) had planned to sell a combined 60.72% stake in IDBI Bank. An Expression of Interest (EoI) for the strategic sale was first issued in October 2022, and financial bids were submitted on February 6.
According to sources, the bids received for the bank were below the reserve price set by the inter-ministerial group (IMG) on disinvestment, which is led by secretaries in the finance ministry. The bids were also reviewed by the core group on disinvestment, chaired by the Cabinet Secretary, which had agreed on the reserve price.
Reports indicate that bids were submitted by Prem Watsa-led Fairfax Financial Holdings and Emirates NBD for the strategic stake sale in IDBI Bank.
At present, the government and LIC together hold 94.71% of the bank. The government owns 45.48%, while LIC holds 49.24%. Out of this combined shareholding, the two entities intended to sell 60.72% in the lender. The plan included reducing 30.48% stake by the government and 30.24% by LIC.
In January 2023, the government had announced that it had received multiple preliminary bids for the transaction. These proposals were later sent for security clearance from the Ministry of Home Affairs (MHA) and a “Fit and Proper” assessment by the Reserve Bank of India.
Bidders who successfully cleared both processes were then allowed to carry out due diligence of the bank before submitting final financial offers.
Earlier, in January 2019, LIC had acquired a 51% controlling stake in IDBI Bank for about ₹21,624 crore to help rescue the lender from mounting bad loans as part of the government’s disinvestment strategy. Following that acquisition, the Reserve Bank of India classified the bank as a private-sector bank.
Later, in December 2020, IDBI Bank was reclassified as an associate company after LIC reduced its stake in the bank to 49.24%.
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