IDBI Bank Disinvestment: Shares of PSU lender IDBI bank rose as high as 11 per cent during the early trade on Monday, despite the weakness in the global markets, as the government invited bids for the strategic disinvestment of the lender. The government aims to jointly sell 60.7 per cent stake in the lender along with the Life Insurance Corporation (LIC).
Following the update, shares of IDBI Bank plunged 11 per cent to Rs 47 on Monday. At 9:50 am the stock was trading at Rs 46. The scrip had settled at Rs 43 on Friday. A combined 6.9 million shares changed hands on the NSE and BSE in th first few minutes of trading. In the past three months, IDBI Bank’s market price has appreciated nearly 50 per cent, as against 6 per cent rise in the benchmark index.
As per the bid details from the Department of Investment and Public Asset Management (DIPAM), LIC will cut its stake in IDBI Bank to 19 per cent from 49 per cent, while the government will cut its share to 15 per cent from 45 per cent.
“Pursuant to the strategic disinvestment of IDBI Bank, the government shall sell such number of shares representing 30.48 per cent; and LIC shall sell such number of shares representing 30.24 per cent, aggregating to 60.72 per cent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank," the bank said in an exchange filing.
According to the expression of interest (EoI), the entities eligible to bid for IDBI Bank include private-sector banks, foreign banks, non-banking financial companies (NBFCs), alternative investment funds (AIFs) registered with the Securities and Exchange Board of India, or any other fund incorporated outside India. The bidder may submit its EoI solely on its own or as part of a consortium.
The successful bidder will have to bring down the equity to 26 per cent in 15 years, and in the first five years from the date of acquisition 40 per cent of the equity capital will remain locked in, according to central bank guidelines.
Furthermore, it has been made mandatory by the government for interested buyers of IDBI Bank to provide details for security clearance from the Ministry of Home Affairs (MHA) in the first stage of the bidding process.
This is the first time that the centre has made MHA clearance necessary. In all instances of CPSE privatisation, the government would seek details regarding security clearance of the bidders at the second stage of the bidding process.