The government has indicated that it may offer its residual stake in IDBI Bank post strategic sale to public in due course. The government and its present owner Life Insurance Corporation of India (LIC), together, intend to sell 60.72 per cent along with management control.
Post strategic sale, the government will have 15 per cent residual stake, while LIC will have 19 per cent stake sale.
Two considerations
When asked why government has not gone for entire stake sale in the current process, Tuhin Kanta Pandey, Secretary in the Department of Investment and Public Asset management (DIPAM), listed two considerations and first one is related with size at which government can expect maximum competition (among bidders).
“If you offer large size, some players will not be interested because of bigger deal size. However, if there is smaller offer, some bidders say they need larger stake as they have to provide some portion for lock-in and sell some portion to be compliant of minimum public shareholding norms. Keeping all these in mind, present size is balanced one,” Pandey said.
The second consideration in this is a possibility of upside. He said that once the management control goes away from LIC and it can have so-called ‘freedoms’. However, it will have to function under the regulation of the RBI which every bank whether private or public has to function that way. Although IDBI Bank has been a private bank, in the eyes of RBI, it’s not truly so. Also, certain remnants of the layer control like CVC etc still remain there including in some ways Parliament committees and so on.
“The government owns large stake as well as LIC which is also a government-controlled organisation. Once this goes, I think markets tends to view things differently. So, there may be a possibility of upside. In that case, at appropriate stage, we can offer it (residual stake) to the public at a later stage,” Pandey said.
On timeline
When asked about any timeline, he said no time line has been fixed. “That discretion would be available with the government,” he said.
Last week, DIPAM invited expression of interest (EoI) for strategic disinvestment to sell its own stake along with that of LIC. As on March 31, 2022, LIC holds 49.24 per cent while Government holds 45.48 per cent in IDBI Bank. Now the government will offload 30.48 per cent while LIC will offer 30.24 per cent along with transfer of management control in IDBI Bank.