Government Reconsiders IDBI Bank Divestment Amid Revised Bidding Process
IDBI Bank Divestment: Centre Explores Alternative Options as Bidders Fail to Meet Reserve Price
The Indian government is exploring alternative options for the divestment of IDBI Bank, despite leaning towards completing the stake sale with the existing bidders, according to two sources privy to the matter. The bank's divestment is currently underway, with efforts underway to conclude the stake sale in the coming months.
The Centre is re-evaluating the bids submitted by Fairfax India Holdings and Emirates NBD, as the previous offers fell short of the reserve price fixed by the government. The reserve price is the minimum price at which the government is willing to sell its stake, determined based on reports from asset valuers.
The strategic sale of IDBI Bank had reached the final stage of bidding after more than three years of efforts. To avoid further delays, the government is keen on completing the stake sale with the existing bidders. However, another option is also on the table - Life Insurance Corporation of India (LIC) acquiring the government's stake. This option would only be pursued if the current effort falls through.
The government and LIC together hold a 94.71 percent stake in IDBI Bank, with the government owning 45.48 percent and LIC 49.24 percent. They are looking to sell a combined 60.72 percent stake, with the government seeking to divest 30.48 percent and LIC 30.24 percent.
| Bidder | Initial Bid Price | Reserve Price |
|---|---|---|
| Kotak Mahindra Bank | ? | ? |
| Emirates NBD | ? | ? |
| Fairfax India Holdings | ? | ? |
The stake sale will likely proceed once market volatility stabilizes. The market capitalization of IDBI Bank has fallen to Rs 80,515 crore from over Rs 1 lakh crore in December.
On January 30, Moneycontrol reported that three short-listed bidders - Kotak Mahindra Bank, Emirates NBD, and Fairfax India Holdings - had been asked to submit final bids for acquiring a 61 percent stake in IDBI Bank by February 5.
Investor Takeaway
The government is reconsidering the divestment of IDBI Bank, which may impact the bank's future ownership structure.
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