Preparations for selling the stake in IDBI Bank were going on for the last five years, now the entire process will probably be started again from scratch (zero). According to the Economic Times report, the financial bids received by the government for selling the bank were much less than the minimum reserve price. For this reason this entire exercise was stopped last week.
Where was the biggest mistake?
The main reason for this hindrance is the method of determining the ‘reserve price’, on which serious questions are now being raised. According to experts, excessive reliance was placed on the stock market price of the bank to decide its minimum selling price. The real catch is that only 5 percent of the shares of IDBI Bank are with the public. 45.48 percent share of the bank is reserved with the government itself and 49.24 percent share is reserved with the Life Insurance Corporation of India (LIC). When there are so few shares available to the public in the market, their prices can easily fluctuate wildly. Due to this, the risk of market manipulation increases significantly. It is believed that due to this wrong evaluation the bids came in lower than expected. Now an important panel of the government will soon review all these aspects in depth and will give its final approval on restarting the process.
A blow to investors’ hopes
This entire speculation about privatization has had a direct impact on the common people who had bought its shares in the hope of profits. Earlier this year, on January 5, when the talk of sale was at its peak, the bank’s stock had jumped to its 52-week high of Rs 118.38. But as soon as the news of cancellation of bids spread in the market, a huge fall of about 19 percent was recorded in the shares. On Tuesday, this share fell and closed at Rs 74.28 on the National Stock Exchange (NSE). It has come very close to its 52-week low (Rs 72) of April 7, 2025, due to which there is an atmosphere of uneasiness among investors.
Strict conditions for new buyers?
Even though the entire process is going to start afresh, the government wants to carry it out without any unnecessary delay. Last time, Prem Vats’s company ‘Fairfax Financial’ and ‘Emirates NBD’ had submitted their bids. Officials have clarified that if these old companies enter the field again, there will be no need for them to seek clearance from the investigating agencies and regulators again. This will save a lot of time.
However, any new or old buyer will ultimately have to meet the ‘fit and proper’ standards of the Reserve Bank of India (RBI). Additionally, the successful bidder will also have to obtain necessary approvals from statutory bodies like the Competition Commission of India (CCI). Besides, it will also be mandatory for that company to bring an ‘open offer’ keeping in mind the interests of the minority shareholders of the bank. Meanwhile, the government has also put an end to speculations that IDBI will be merged with any other government bank. There is no such plan.