Even though the Centre and the Life Insurance Corporation (LIC) will continue to own a significant stake in IDBI Bank post its privatisation, the new owner of the lender will be free to run the affairs. Moreover, the government and LIC will not veto any proposals of the new owner.
Bids for the sale of 60.72 per cent stake in IDBI Bank were invited earlier this month. The bank is owned 45.48 per cent by the government and 49.24 per cent by the Life Insurance Corporation of India (LIC). IDBI Bank’s valuation as of Friday is Rs 47,633 crore, however, the government is looking for at least 30 per cent markup in the sale.
Shares of the bank closed at Rs 44.30 on Friday and at the current price, sale of 61 per cent stake would fetch about Rs 29,000 crore to the government.
According to an official, the shareholding of the government and LIC will reduce to 34 per cent post IDBI Bank’s privatisation but they do not intend to move in tandem to block any special resolution proposed by the new promoter.
Not interested in controlling the institution’
This is with a view to assuaging the concerns of investors. “There should not be any such concern. If we are selling a 60.72 per cent 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.
The clarification comes after concerns were raised that the government and LIC holding 34 per cent stake in IDBI Bank after its privatisation may act as a deterrent for bidders. This is because a shareholder or a group of shareholders together holding 25 per cent or more of the shares can effectively oppose a special resolution.
“If that was the intent, then we would not have gone ahead with selling about 61 per cent 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,” the official added further.
Decisions like share buyback, loans and investments by company, removal of auditor before time and reduction in share capital are needed to be approved by a special resolution, with at least 75 per cent of shareholders voting in favour.
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 favour 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 privatisation in the first half of next fiscal beginning April 2023.
On October 7, the government, together with LIC, offered to sell 60.72 per cent stake in IDBI Bank and invited preliminary bids or Expression of Interest (EoI) from potential buyers by December 16.
