The government may soon start the bidding process for IDBI Bank.
The Indian government was trying to sell the bank for many years, now very good progress is being seen in it. The government has planned to raise around Rs 64 thousand crore by selling its majority stake in IDBI Bank Limited soon. Bids can also be invited for this soon. All preparations for the bid are almost complete. According to people familiar with the matter, talks with potential contenders are in the advanced stage. The bidding process can be formally started by a government agency this month itself. If this transaction is completed, then after decades a government bank will move towards privatization.
Bank came in profit
The Government of India is aiming to sell 60.72 percent stake in this Mumbai-based bank, which is equal to about 7.1 billion dollars i.e. about 64 thousand crore rupees at the current market value of IDBI Bank. The bank, once heavily indebted, has emerged in recent years after a massive clean-up and returned to profit after capital infusion and aggressive recovery and a sharp reduction in NPAs. The government missed the predetermined deadline to complete the sale due to hurdles such as delays in obtaining regulator approvals. Government officials have repeatedly indicated that the disinvestment process will be completed in the financial year ending March 2026. The Minister of State for Finance said in written answers to questions in Parliament this week that the selected bidders are currently doing due diligence.
How much stake do the government and LIC have?
Kotak Mahindra Bank Ltd, Emirates NBD PJSC and Fairfax Financial Holdings Ltd had submitted so-called expressions of interest in IDBI Bank and were required to meet appropriate criteria by the country’s central bank, sources told Bloomberg. Expression of interest is the first stage of the bidding process. However, financial bids cannot be placed on its sale. The Central Government and the public sector Life Insurance Corporation of India (LIC) together hold about 95 percent stake in this bank. The government will sell its 30.48 percent stake in the bank, while LIC will sell 30.24 percent stake with management control transfer. No statement has come from the Finance Ministry of India, LIC, IDBI Bank, Kotak and Fairfax.
Uday Kotak is at the forefront
According to sources in the Bloomberg report, it has been said that Kotak, backed by Asia’s richest banker Uday Kotak, is considered to be the frontrunner in bidding for IDBI Bank. Nevertheless, he said the lender has indicated in negotiations that it will not pursue the deal at a higher price. Jefferies had said in a note late last month that mergers and acquisitions could significantly increase the size of Kotak. Still, if the government asks for cash for this deal, it could impact Kotak’s capital and the profits of the merged bank.
Canadian and also from the Middle East
According to sources, Canadian billionaire Prem Vats’s Fairfax, which is an active investor in companies like CSB Bank Ltd in India and many others, remains in the race. According to sources, Emirates NBD, one of the largest lenders in the Middle East, which recently announced a mega deal to buy majority stake in RBL Bank Ltd, is also considering participating. IDBI Bank shares have risen nearly 30 percent so far this year, taking its market value to more than Rs 1 trillion ($11.6 billion).
Bloomberg News reported in 2022 that the government was pushing for a valuation of around Rs 640 billion for the bank, a figure it has long been surpassing as its shares surged in anticipation of the takeover. Although the winning bidder is expected to be announced by the end of March next year, according to sources, the deal is still expected to be delayed until approvals and other clearances are received.