No govt, LIC veto post privatization of IDBI Bank

At Friday's closing price of Rs 44.30, IDBI Bank has valued at Rs 47,633 crore but the government is looking for at least a 30 percent markup in the sale.
No govt, LIC veto post privatization of IDBI Bank

NEW DELHI: The government and state-owned insurer LIC, who will continue to hold significant shareholding in IDBI Bank post its privatization, will not veto any proposals of the new owner as a part of their plan to give the incoming promoters a free hand, a senior official said.

The government earlier this month invited bids for the sale of a 60.72 percent stake in IDBI Bank, which is 45.48 percent owned by the government and 49.24 percent by the Life Insurance Corporation of India (LIC).

At Friday's closing price of Rs 44.30, IDBI Bank has valued at Rs 47,633 crore but the government is looking for at least a 30 percent markup in the sale.

At the current price, the sale of a 61 percent stake would fetch about Rs 29,000 crore to the government.

The official said that post-privatization, the government, and LIC shareholding will come down to 34 percent but they do not intend to move in tandem to block any special resolution proposed by the new promoter.

This is to assuage the concerns of investors.

''There should not be any such concern. If we are selling a 60.72 percent stake and transferring management control, it should be clear to investors that we are not interested in controlling the institution and hence will not oppose any resolution,'' the official said.

''We will give an assurance on this at the RFP or financial bids stage to the qualified bidders for IDBI Bank,'' the official told PTI.

There have been concerns in some quarters that the government and LIC holding a 34 percent stake in IDBI Bank after its privatization may act as a deterrent for bidders as a shareholder or a group of shareholders together holding 25 percent or more of the shares can effectively oppose a special resolution.

Allaying such a concern, the official said ''if that was the intent, then we would not have gone ahead with selling about 61 percent stake. We could have sold less. The government and LIC would not act together in opposing any resolution and we will clarify that in writing in the share purchase pact.'' Decisions like share buyback, loans, and investments by the company, removal of auditor before time, and reduction in share capital require to be approved by a special resolution, with at least 75 percent of shareholders voting in favor.

While inviting the expression of interest (EoI), the government already clarified that if the successful bidder intends to amalgamate IDBI Bank with itself or if the same is required by RBI, the Centre and LIC will vote in favor of any such merger/ amalgamation at the board and/or shareholders' meetings of IDBI Bank.

The government is expecting to get the financial bids for IDBI Bank by March and complete the process of privatization in the first half of the next fiscal beginning April 2023.

The government, together with LIC, on October 7 offered to sell a 60.72 percent stake in IDBI Bank and has invited preliminary bids or Expressions of Interest (EoI) from potential buyers by December 16. LIC and government hold 49.24 percent and 45.48 percent stakes respectively. The remaining 5.28 percent of shareholding is with the public.

Of this, the government will sell 30.48 percent and LIC 30.24 percent stake, aggregating to 60.72 percent of the equity share capital of IDBI Bank. In addition, the buyer will have to make an open offer to the minority shareholders of IDBI Bank for buying a 5.28 percent stake.

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