The Centre has revived the strategic sale of its stake in IDBI Bank, along with LIC's stake, a month after the two bids were rejected as they were way below the reserve price.
Fresh Valuation and Process Review
Persons familiar with the discussions said a fresh valuation exercise is being undertaken, given that the bank has a small free float, making price discovery through that route difficult. At the same time, officials will examine whether the sale process should be limited to the existing set of bidders or the process should be undertaken afresh, although the idea is to expedite the exercise to ensure that global investors retain trust and the government also raises resources to meet its ambitious funding requirements for investment and schemes.
Retaining the pool of players who had bid may open up the possibility of litigation, an official cautioned. At the same time, there is recognition in the government that the abandoned sale process was too long, lasting five years. Keeping a shorter timeline is critical in whatever shape the process is revived. Besides, feedback from bidders is seen to be key, as some of the interested players, such as Kotak Mahindra, dropped out due to the high pension burden that came with the bank.
Government Stake and Concerns
Similarly, the government's continuation as a stakeholder is another concern flagged by some bankers, who argued that many feared the Centre may drive operations in a way that served its interest, and the new owner may not get a completely free hand. "If the government is really serious about privatisation, it should not have any remaining shares," said an executive with one of the entities that was interested in acquiring the bank.
The Centre holds a 45.5% stake in IDBI Bank, while LIC is the largest shareholder with a 49.2% holding. The exact details of the process are expected to be firmed up in the coming months. With the Centre chasing an ambitious disinvestment and asset monetisation target of Rs 80,000 crore in the current fiscal year, merely depending on InvITs by NHAI may not help the government.
IDBI Bank shares have recovered in recent days after Finance Minister Nirmala Sitharaman said the government will divest its stake in the entity, closing at Rs 76.9 on the BSE on Tuesday.
