New Delhi: The government said on Friday that it and LIC would sell a combined 60.72 per cent share in IDBI Bank as part of the privatisation process.

In order to be qualified to bid for IDBI Bank, the Department of Investment and Public Asset Management (DIPAM) stated that potential investors needed to have a minimum net worth of Rs 22,500 crore and net profit in three of the previous five years.

A consortium could only have a total of four members.

The winning bidder would be obligated to lock in at least 40% of the equity capital for a period of five years starting from the date of acquisition.

Additionally, it stated that the Reserve Bank will choose the qualified interested parties and the equity position these firms would hold in IDBI Bank. The bidder would need to pass the banking regulator’s “Fit and Proper” evaluation.

Additionally, it prohibited individuals or big corporations from participating in the bidding process.

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Potential purchasers have until December 16 to submit offers or Expressions of Interest (EoI).

Together, the government and LIC own 94.72 per cent of IDBI Bank. The government owns 488.99 billion shares, or 45.48 per cent of IDBI Bank, while Life Insurance Corporation (LIC) has 529.41 billion shares, or 49.24 per cent of the bank. 5.2% of shareholders are public.

The Department of Investment and Public Asset Management (DIPAM) announced the sale of the government’s holding and LIC’s investment, totalling 60.72 per cent of the equity share capital of IDBI Bank, along with the transfer of management control of the bank.

The total shareholding of LIC and the government will drop to 34% after the stake sale.

On the BSE on Friday, shares of IDBI Bank closed at Rs. 42.70, an increase of 0.71 per cent over the previous closing. The 60.72 per cent stake would be worth more than Rs 27,800 crore at the current market pricing.

Private sector banks, foreign banks, RBI-registered non-banking finance companies, Sebi-registered Alternative Investment Funds (AIFs), and a fund/investment vehicle incorporated outside of India would be allowed to submit bids, either individually or as a consortium, according to the Preliminary Information Memorandum (PIM) (released by DIPAM) for privatising IDBI Bank.

The FDI regulations, which permit 74% foreign ownership through the approved process and 49% through the automatic method, would apply to the purchase of IDBI Bank. The bank must always hold at least 26% of its paid-up capital in local residents’ hands.

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“The price at which the equity shares of IDBI Bank can be transferred to a person resident outside India shall not be less than the price worked out in accordance with the SEBI guidelines,” the PIM said.

The EoI said that the winning bidder would be obliged to make an open offer to IDBI Bank’s public shareholders and would be required to escrow, in cash, the whole consideration payable under the offer, assuming full acceptance.

According to Sebi’s open offer requirements, the purchaser must make a buyout offer to minority shareholders whenever they acquire “control” of a listed firm or a combined 25% or more of its shares.

5.2% of IDBI Bank’s shareholders are small business owners.

“It is envisaged that strategic acquirer/investor will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank,” the PIM said.

The PIM stated that before granting access to the Data Room to the Qualified Interested Parties, the DIPAM will get the requisite security clearance (QIPs). Along with submitting an Expression of Interest, interested parties, its directors, and shareholders holding more than 10% must also submit a self-declaration for security clearance.

Additionally, when filing the EoI, the interested parties and each consortium member must make a statement or disclosure on any orders, pending investigations, or proceedings by any court, regulatory authority, SFIO, NCLT, or NCLAT.

The winning bidder will be obliged to align its shareholding with the RBI criteria by reducing or diluting its stake in accordance with the glide path that will be given by the QIPs at the RFP stage.

According to the RBI’s “Master Directions on Ownership in Private Sector Banks, 2016,” banks have 15 years from the start of their operations to reach the required shareholding level.

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The GoI and LIC will vote in favour of any merger or amalgamation at Board and/or shareholder meetings of IDBI Bank if the winning bidder plans to do so or if the RBI requires it, according to the PIM.

The transaction and legal advisors for managing the stake sale of IDBI Bank are KPMG India Pvt Ltd and Link Legal.

The Cabinet Committee on Economic Affairs gave in-principle approval for the strategic disinvestment and transfer of management control in May 2021 after the Cabinet Committee on Economic Affairs first announced the privatisation of IDBI Bank in the Union Budget of 2021–22.

With effect from January 21, 2019, the Reserve Bank of India classified IDBI Bank as a Private Sector Bank as a result of Life Insurance Corporation of India (LIC) purchasing 51% of the bank’s total paid-up equity share capital.

In 2022–2023 (Apr–Mar), the government set a goal of raising Rs 65,000 crore through divestment, of which it has already raised Rs 24,544 crore.

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