The government is now planning to invite expressions of interest (EoIs) in May for selling its stake in IDBI Bank and expects to complete the disinvestment process in the current financial year 2022-23, according to sources. They said roadshows for the IDBI Bank divestment are not over yet.
Earlier, the government’s plan was to invite EoIs for the privatisation of IDBI Bank in April. “The government is now planning to invite EoIs in May,” the sources told CNBC-TV18. They said the government is still aiming to complete the IDBI Bank privatisation in FY23 and it will happen within the extant RBI framework.
The Reserve Bank of India’s (RBI) rules do not include corporate houses as bidders/ promoters of banks. Through the divestment, the government is planning to sell its entire 45.48 per cent stake.
In January 2019, the bank became a subsidiary of LIC, following the acquisition of additional 8,27,590,885 equity shares. In December 2020, IDBI Bank was classified as an associate company due to the reduction of LIC shareholding to 49.24 per cent.
The Cabinet Committee on Economic Affairs had in May 2022 approved “in principle” the strategic disinvestment and transfer of management control in IDBI Bank. For the disinvestment, amendments to the IDBI Bank Act have been made through the Finance Act 2021 and advisors have also been appointed.
The government may also look to sell around a 26 per cent stake in the bank, along with management control to attract investors.
LIC Chairman M R Kumar has earlier said, “We would like to have some stake in IDBI Bank. The whole idea of us picking up stake in the bank was strategic in nature and that has not gone away at all… In fact, IDBI Bank has been the strongest contributor for the bancassurance channel. This was something that would help LIC to grow that particular channel in the post-IPO scenario.”
He had said, “I, as LIC Chairperson, would like to see the relationship continuing in the future as well.”
Bancassurance is an arrangement between a bank and an insurance company, allowing the latter to sell its products to the bank’s customers and others through the branch network.
Last week, LIC-promoted IDBI Bank’s board approved the lender’s rupee bond borrowings limit of Rs 8,000 crore for the financial year 2022-23.
The rupee bond borrowing limit can be borrowed in one or more tranches comprising of Additional Tier I (AT-1) bonds up to Rs 3,000 crore and senior/ infrastructure bonds up to Rs 1,000 crore by way of private placement during 2022-23, the lender had said in a regulatory filing.
For the October-December 2021 quarter, the bank reported a 53 per cent jump in its standalone net profit to Rs 578 crore. It had reported a standalone net profit of Rs 378 crore in the year-ago period. However, the lender’s total income fell to Rs 5,772.86 crore during the quarter, compared with Rs 6,003.91 crore in the same period of 2020-21.
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