The road to privatise IDBI Bank has been largely cleared, with the Reserve Bank of India (RBI) signaling its approval of potential investors. The NDA government at the Centre initiated the stake sale process in May 2021, awaiting RBI’s assessment of bidders’ suitability. Confirming the development, sources within RBI reported that all but one foreign bidder has been evaluated, except failing to provide the required information, hindering the assessment process.
With the receipt of RBI’s favorable assessment, attention has now turned to Finance Minister Nirmala Sitharaman’s budget presentation on May 23. Market sentiments are focused on indications regarding government disinvestment plans. Following RBI’s ‘fit and proper’ nod to potential buyers, IDBI Bank shares surged by 6%, trading at Rs 92.80 on the NSE at 11 am on Thursday, July 18. The government, holding a 45.5% stake, plans to disinvest a total of 60.7%, including shares owned by LIC.
Regarding the foreign bidder, the RBI has reportedly completed assessments for all but one foreign entity. This particular bidder did not disclose the required information, nor did its foreign regulator provide the necessary data.
Currently, the central government holds a 45.5% stake in IDBI Bank, while LIC possesses over 49%. Initially established as a financial institution, IDBI later transformed into a bank. Under the government’s disinvestment blueprint, a total stake of 60.7% in the bank is slated for sale, comprising 30.5% from the government’s share and 30.2% from LIC’s.
Estimations suggest that the government stands to garner more than Rs 29,000 crore from the stake sale, given IDBI Bank’s current market capitalisation of approximately Rs 99.78 thousand crore. The government’s disinvestment plans, which also encompass BPCL, CONCOR, BEML, Shipping Corporation, IDBI Bank, and an insurance firm, have faced delays over the past 18 months. Union Minister Hardeep Puri recently confirmed the postponement of BPCL’s disinvestment.
The Finance Minister’s budget is expected to provide further clarity on the disinvestment strategy. Market analysts remain optimistic about IDBI Bank’s privatisation, viewing it as a crucial step to mitigate financial burdens stemming from past losses.
Over the past decade, the government has consistently expressed its intention to divest from ‘non-strategic’ sectors, with Air India being the sole disinvestment thus far. Market analysts are optimistic about the privatisation of IDBI Bank, noting its status as a private entity. The government’s increased stake in the bank was necessitated by the need to inject capital to offset substantial losses incurred from debt.
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