IDBI Bank privatisation: LIC to recover its investment by time of sale

Since the commencement of the IDBI Bank privatisation process in May last year, the share price has jumped from Rs 35 a share to Rs 45 a piece

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LIC

New Delhi: State-owned insurance company LIC is expected to recover its Rs 21,624-crore investment it had made in IDBI Bank as share prices are likely to rebound to 2019 levels by the time the lender is privatised, an official said. The official said that since the commencement of the IDBI Bank privatisation process in May last year, the share price has jumped from Rs 35 a share to Rs 45 a piece.

“We are expecting IDBI Bank scrip to move up further. The price is expected to move up closer to the price at which LIC had picked up a stake in 2019,” the official told PTI.

The government and Life Insurance Corporation (LIC) together hold 94.72 percent in IDBI Bank. Of this, LIC’s holding is 49.24 percent, while the government holds the rest 45.48 percent stake. Public shareholders hold 5.28 percent.

LIC had bought a 51 percent stake in the IDBI Bank in 2019 for Rs 21,624 crore at an average price of Rs 61 per share. Following a QIP issue in December 2020, the stake of LIC came down to 49 percent.

Besides, the government and LIC together infused Rs 9,300 crore in IDBI Bank to bring it out of RBI‘s Prompt Corrective Action (PCA) framework.

IDBI Bank privatisation will be win-win for both govt & LIC

“IDBI Bank privatisation will be a win-win for both the government and LIC,” the official added.

At the current market price, sale of 61 percent stake would fetch about Rs 29,000 crore to the exchequer.

The announcement of IDBI Bank privatisation was first made in the Union Budget of 2021-22, following which the Cabinet Committee on Economic Affairs gave approval for strategic disinvestment and transfer of management control in May 2021.

On October 7, the government invited EoIs from investors for buying 60.72 percent stake, along with management control, in IDBI Bank and set December 16 as the deadline for submitting preliminary bids.

The Department of Investment and Public Asset Management (DIPAM), while inviting Expressions of Interest (EoI) from potential investors, said that the potential investor should have a minimum net worth of Rs 22,500 crore, must report net profit in 3 out of the past 5 years to be eligible for bidding for IDBI Bank and a maximum of 4 members would be allowed in a consortium.

The successful bidder would be required to mandatorily lock-in at least 40 percent of the equity capital for 5 years from the date of acquisition.

It further said that the selection of the qualified interested parties and the amount of equity stake of such entities in IDBI Bank would be decided by the Reserve Bank and the bidder would have to clear the assessment done by the banking regulator.

It also barred large industrial/corporate houses or individuals from participating in the bidding process.

(With PTI inputs)

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