The government is planning to sell at least 51 per cent of state-owned IDBI Bank, according to a Bloomberg report. The report also said officials in the government and state-owned LIC, which together own nearly 94 per cent stake in IDBI Bank, are discussing the quantum of shares to sell.
It added that LIC and the government will take buyer interest by the end of September. A group of ministers will make the final decision on the structure of the deal. Shares of IDBI Bank have jumped 6.3 per cent in the past 12 months, raising its market valuation to about Rs 42,470 crore ($5.3 billion).
According to the report, authorities also plan to sell some stakes of the government and LIC in IDBI Bank and cut management control. The RBI will allow investors to buy a stake larger than 40 per cent, as entities seek permission from the central bank to purchase stakes above that threshold, while non-regulated firms are capped at purchases of 10-15 per cent.
On August 12, news agency PTI reported that Life Insurance Corporation has said it has not received any timeline from the government for the stake sale in its subsidiary IDBI Bank. LIC owns 49.2 per cent of the lender and the government and public own the remaining shareholdings in the bank which was on the verge of collapse before it was forced into the control of LIC weighed by a third of its loans turning dud.
Addressing the media during its maiden earnings call, its Chairman M R Kumar said the Corporation has no timeline yet for the stake sale. The divestment department is working on it but so far no expression of interest has been called in.
In its IPO filings in March this year, LIC had said that it will retain part of its 51 per cent stake in IDBI Bank to reap the benefits of the bancassurance channel. The plan is to completely privatise the bank as the government wants to exit it. IDBI Bank became a subsidiary of LIC with effect from January 2019, following the acquisition of an additional 82,75,90,885 equity shares.
On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of LIC shareholding to 49.24 per cent following the issuance of additional equity shares by the bank under a qualified institutional placement. LIC had bought a 51 per cent in IDBI Bank in 2019 for Rs 21,624 crore at an average price of Rs 61 per share.
LIC also pumped in Rs 4,743 crore into IDBI Bank in October 2019, using policyholders’ funds. The bank further raised Rs 1,435.1 crore on December 19, 2020, by way of a QIP which brought down LIC’s stake in IDBI to 49.24 per cent.