Image Source : PTI KPMG India Pvt Ltd and Link Legal are acting as the transaction and legal advisor for managing the IDBI Bank stake sale.
The government on Friday invited bids for privatising IDBI Bank and said that it together with LIC will sell a total of 60.72 per cent stake in the financial institution. The Department of Investment and Public Asset Management (DIPAM), while inviting Expressions of Interest (EoI), said that the potential investor should have a minimum net worth of Rs 22,500 crore, must report a net profit in three out of the past five years to be eligible for bidding for IDBI Bank. Also, a maximum of four members would be allowed in a consortium.
The successful bidder would be required to mandatorily lock in at least 40 per cent of the equity capital for five years from the date of acquisition. It further said that the selection of the qualified interested parties and the amount of equity stake such entities would hold in IDBI Bank would be decided by the Reserve Bank and the bidder would have to clear the ‘Fit and Proper’ assessment done by the banking regulator. It also barred large industrial/corporate houses or individuals from participating in the bidding process. The last date for submission of bids or Expression of Interest (EoI) by potential buyers is December 16.
The government and LIC hold 94.72 per cent stake together in IDBI Bank. Life Insurance Corporation (LIC) holds 529.41 crore shares representing 49.24 per cent stake in IDBI Bank, while the government holds 488.99 crore shares or 45.48 per cent stake. Public shareholders hold 5.2 per cent stake in the bank. The government will sell 30.48 per cent and LIC will offload 30.24 per cent stake, aggregating to 60.72 per cent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank, Department of Investment and Public Asset Management (DIPAM) said while inviting bids.
After stake sale, the combined shareholding of LIC and the government will come down to 34 per cent. Shares of IDBI Bank closed at Rs 42.70, up 0.71 per cent over previous close on the BSE on Friday. At the current market price, the 60.72 per cent stake would be valued at over Rs 27,800 crore.
The Preliminary Information Memorandum (PIM) brought out by DIPAM for privatising IDBI Bank also states that private sector banks, foreign banks, RBI-registered non-banking finance companies, Sebi registered Alternative Investment Funds (AIFs), a fund/investment vehicle incorporated outside India would be allowed to submit bids, either individually or as consortium.
The acquisition of IDBI Bank would be governed by the FDI regulations which allow 74 per cent foreign holding in banks through approval route, and 49 per cent through the automatic route. At all times, at least 26 per cent of the paid-up capital of the bank is required to be held by residents. “The price at which the equity shares of IDBI Bank can be transferred to a person resident outside India shall not be less than the price worked out in accordance with the SEBI guidelines,” the PIM said.
The successful bidder would be required to make an open offer to public shareholders of IDBI Bank and will be required to put in escrow, in cash, the entire consideration payable under the open offer assuming full acceptance of the open offer, the EoI said. As per the open offer guidelines of Sebi, any acquisition of an aggregate of 25 per cent or more shares in a listed entity or acquisition of ‘control’ mandates the acquirer to make a buyout offer to minority shareholders. Minority shareholders have 5.2 per cent in IDBI Bank.
“It is envisaged that strategic acquirer/investor will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank,” the PIM said. The PIM said that necessary security clearance will be taken by the DIPAM before the Data Room access is given to the Qualified Interested Parties (QIPs). The interested parties, its directors and shareholders holding more than 10 per cent would be required to submit a self-declaration for the security clearance along with submission of EoI.
Besides, the interested parties and each member of the consortium would have to give a declaration or make a disclosure on order/ pending investigation /proceedings by any Court/ regulatory authority/SFIO/ NCLT/ NCLAT while submitting the EoI. The Successful Bidder will be required to reduce/dilute its shareholding in accordance with the glide-path to be submitted by the QIPs at the RFP stage to align its shareholding in accordance with the RBI guidelines.
The ‘Master Directions on Ownership in Private Sector Banks, 2016′, issued by RBI, allow a timeline of 15 years from date of commencement of business of the bank to achieve the prescribed shareholding limit in long run. In the event the successful bidder intends to amalgamate IDBI Bank with itself or if the same is required by RBI, the GoI and LIC will vote in favour of any such merger/amalgamation at Board and/or shareholders’ meetings of IDBI Bank, the PIM said.
KPMG India Pvt Ltd and Link Legal are acting as the transaction and legal advisor for managing the IDBI Bank stake sale. The announcement of IDBI Bank privatisation was first made in Union Budget of 2021-22, following which the Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in May 2021. IDBI Bank was categorised as Private Sector Bank by the Reserve Bank of India with effect from January 21, 2019, consequent upon Life Insurance Corporation Of India (LIC) acquiring 51 per cent of the total paid-up equity share capital of the bank. The government has set a target of garnering Rs 65,000 crore from divestment in 2022-23 (Apr-Mar), out of which it has already raised Rs 24,544 crore.
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