If you are also interested in banking sector shares, then you may soon get a big opportunity. Actually, the Central Government is now going to adopt a new path to sell its stake in IDBI Bank. Recently, a big plan to hand over this bank completely into private hands could not come to fruition. After this, now the government is exploring the option of ‘Offer for Sale’ i.e. OFS.
Why was the old mega deal cancelled?
Before understanding this new scheme, it is important to know why the government suddenly had to take this step. Earlier this month, the government and Life Insurance Corporation of India (LIC) had jointly decided to sell their huge 60.72 percent stake in IDBI Bank. There was a lot of excitement in the market regarding this mega sale. However, this proposed deal was suddenly cancelled. If sources are to be believed, the financial bids made by the two big parties who had shown interest in buying the bank were much lower than the minimum reserve price fixed by the government. Instead of making a loss-making deal, the government thought it better to stop the sale proposal there.
Who has ‘control’ of the bank?
The current situation of IDBI Bank is quite interesting. This is a bank whose control is completely in the hands of LIC, the country’s largest insurance company. If we look at the figures, LIC holds 49.24 percent stake in the bank and it has complete control over it. At the same time, the Government of India also has a major stake of 45.48 percent in it. Between these two big players, only 5.29 percent is left for the general public i.e. public shareholding. Due to such low public shareholding, many technical and practical problems related to the bank are coming to the fore.
What will the common investor get from increasing market share?
Now the question arises that why does the government want to increase public holding in the market by bringing OFS and what does the common man have to do with it. In fact, when the general public’s stake (free float) in a company is very low, then it becomes very difficult to estimate the real value of that share. In the case of IDBI Bank, due to only 5.29 percent shares being held by the common people in the market, the correct valuation of the bank is not being done.
If the government increases this stake to 10 to 15 percent through OFS, then more shares of the bank will be available in the market. This will increase the buying and selling of shares and pricing will become more transparent and reliable. This will not only give common investors an opportunity to buy shares at the right price, but in future, if the government wants to do a strategic sale of this bank, then it will also be able to get a fair and clear price.