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After its strategic sale and the government's residual 15 per cent stake in the lender post privatisation will be considered as 'public shareholding', the IDBI Bank will continue to operate as an 'Indian private sector bank', said the finance ministry said on 27 November.

According to the Finance Ministry, an 'appropriate dispensation' for the new owner to achieve minimum public shareholding (MPS) over an extended period is under consideration. It added that the winning bidder will have no restriction on undertaking corporate restructuring of the subsidiaries of IDBI Bank.

The clarifications were made by the Department of Investment and Public Asset Management (DIPAM) to potential investors' pre-EoI queries.

Earlier on 7 October, the government had invited bids for privatising IDBI Bank and said that it together with LIC will sell a total of 60.72 per cent stake in the financial institution. The last date for putting in Expression of Interest (EoI) or preliminary bids is December 16.

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Together the government and LIC94.72 per cent stake in IDBI Bank and successful bidder would be required to make an open offer for acquisition of 5.28 per cent public shareholding.

Following the transaction, the government will own 15 per cent stake and LIC 19 per cent shareholding in IDBI Bank, taking their total holding to 34 per cent.

On the issue of if the government and LIC will have any board seats or participate in the management and governance of IDBI Bank after the sale, DIPAM said "the Bidders are informed that GOI (Government) has already made application for reclassification of its shareholding as 'public'. Further, the details regarding such aspects will be provided in the definitive documents (including the Share Purchase Agreement) shared with the QIPs (Qualified Interested Parties) at the RFP stage".

To a query on whether an extended timeline will be provided for the merged entity to comply with MPS requirements, the DIPAM said, "As regards the MPS requirements, the appropriate dispensation is under consideration. Further clarification would be provided at the RFP stage."

Sharing details on if IDBI Bank will be reclassified as a wholly-owned subsidiary in the event that the successful bidder is a foreign bank, DIPAM said, "The Target (IDBI Bank) shall post consummation of the transaction continue to function and operate as an Indian private sector bank."

Apart from this, investors also sought clarification whether corporate restructuring (including merger and demerger) is permitted for subsidiaries of IDBI Bank. To this DIPAM said, "Subject to extant RBI regulations/directions and other requirements as RBI or respective regulator may stipulate, there are no restrictions under the PIM for undertaking any corporate restructuring for the subsidiaries of IDBI Bank, post consummation of the transaction."

IDBI Bank has subsidiaries like IDBI Asset Management, IDBI Trusteeship Services and IDBI MF Trusteeship Company.

On the issue of if the successful bidder would be required to seek SEBI approval for a change in control of the asset management company, DIPAM said, "The appropriate dispensation/exemption in this regard are under discussions and shall be suitably advised at the RFP stage in consultation with SEBI."

Earlier, DIPAM said potential investors should have a minimum net worth of 22,500 crore and must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank. Also, a maximum of four members would be allowed in a consortium.

The successful bidder would be required to mandatorily lock-in at least 40 per cent of the equity capital for five years from the date of acquisition.

With PTI inputs.

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