No Government, LIC veto post IDBI Bank privatisation

The government and state-owned insurer LIC, who will continue to hold significant shareholding in IDBI Bank post its privatisation, will not veto any proposals of the new owner as part of their plan to give the incoming promoters a free hand, news agency PTI has reported citing senior official.

On 9 October, the government 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 Department of Investment and Public Asset Management (DIPAM), while inviting Expressions of Interest (EoI), said that the potential investor should have a minimum net worth of ₹22,500 crore, must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank

At Friday's closing price of ₹44.30, IDBI Bank is valued at ₹47,633 crore but the government is looking for at least 30 per cent markup in the sale.

At the current price, sale of 61 per cent stake would fetch about ₹29,000 crore to the government.

The official said post-privatisation, the government and LIC shareholding will come down to 34 per cent but they do not intend to move in tandem to block any special resolution proposed by the new promoter.

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.

There have been concerns in some quarters that the government and LIC holding 34 per cent stake in IDBI Bank after its privatisation may act as a deterrent for bidders as a shareholder or a group of shareholders together holding 25 per cent or more of the shares can effectively oppose a special resolution.

Allaying such a concern, the official said "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."

Decisions like share buyback, loans and investments by company, removal of auditor before time and reduction in share capital require 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.

The government, together with LIC, on October 7 offered to sell 60.72 per cent stake in IDBI Bank and has invited preliminary bids or Expression of Interest (EoI) from potential buyers by December 16.

LIC and government hold 49.24 per cent and 45.48 per cent stake respectively. The remaining 5.28 per cent shareholding is with the public.

Of this, the government will sell 30.48 per cent and LIC 30.24 per cent stake, aggregating to 60.72 per cent of the equity share capital of IDBI Bank.

In addition, the buyer will have to make an open offer to the minority shareholders of IDBI Bank for buying 5.28 per cent stake. 

(With inputs from PTI)