IDBI Bank’s shares rallied 11% to Rs 47.50 on the BSE in Monday’s intra-day trade, in an otherwise weak market, after the government invited initial bids for strategic disinvestment in the lender. At 02:27 pm, the stock was trading 9.25% higher at Rs 46.65, as compared to a 0.68% decline in the S&P BSE Sensex. The stock settled at Rs 43 on Friday. In the past three months, IDBI Bank’s market price has surged nearly 50%, as compared with a 6% rise in the benchmark index.
“Pursuant to the strategic disinvestment of IDBI Bank, the government shall sell such number of shares representing 30.48% and LIC shall sell such number of shares representing 30.24%, aggregating to 60.72% of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank,” the bank said in an exchange filing
The Ministry of Finance on Friday invited expression of interest (EoI) for strategic disinvestment in IDBI Bank, a move which would allow the sale of a joint stake of the government and Life Insurance Corporation (LIC) of up to 60% in the bank.
According to the bid details for the Department of Investment and Public Asset Management (DIPAM), LIC will lower its stake in IDBI Bank to 19% from 49%, while the government will lower its stake to 15% from 45%.
Private sector banks, non-banking finance companies (NBFCs), foreign banks, and even alternative investment funds registered with SEBI can bid for IDBI Bank, according to the conditions of EoI.
The successful bidder has been mandated to scale down equity to 26% in 15 years. However, in the first five years starting from the date of acquisition, 40% of equity capital would remain captive or locked.
Additionally, it has been made compulsory 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 mandatory. In all cases of CPSE privatisation, the government would seek details regarding the security clearance of the bidders at the second stage of the bidding process.