The Centre will come out with an expression of interest (EOI) for the sale of IDBI Bank by the end of March but may not offload its entire stake in the bank in one go, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said.
The government will also file the Draft Red Herring Prospectus (DRHP), or the primary prospectus, of Life Insurance Corporation (LIC) with the market regulator next week, and expects to list it on stock exchanges by the end of the financial year.
LIC, which currently holds management stake in IDBI Bank, has 49.24 per cent shareholding, while the Central government holds another 45.48 per cent stake in the bank. The non-promoter shareholding in the bank currently stands at 5.29 per cent.
“We had detailed consultations with the Reserve Bank of India (RBI) and have worked out the process. There are licences involved and we do not want any uncertainty after the financial bids are placed. We plan to sell LIC’s and the government’s stake together and the LIC’s management control will be passed on. But not the entire (stake) may go,” Pandey told The Indian Express.
The sale of IDBI Bank will be the first such case of “voluntary discovery” of the buyer through an open bidding process; in similar cases, banks have been sold to buyers only under distress situations.
“So far RBI has been doing it in a distress situation using their powers. But here, it will be a voluntary discovery of a buyer through an open bidding process. Such a thing has not taken place so far. This is the first instance,” Pandey said.
The entire stake, however, may not be offloaded at one go as the new bidder will have to infuse fresh equity into IDBI Bank, he said, adding that the bidder may choose not to pay off the government and LIC’s shareholding.
Asked whether the government would sell at least 51 per cent stake, Pandey said that it did not matter as the voting shares in case of banks were capped.
“In case of banks, the voting shares are capped at 26 per cent. So even if we have 51 (per cent stake), the voting is capped. That’s by law. We will be doing roadshows and coming out with an EoI. Typically, it takes nine months to one year for an M&A (merger and acquisition) if we start an EoI. If we launch an EoI by the end of this year, we should be completing the transaction by the end of next year,” Pandey said.
The initial public offering (IPO) of LIC will, however, be completed soon and the government will file the DRHP next week, Pandey said, adding that they hope to complete it before the financial year ends.
“That’s the hope. Our embedded value is done. IRDAI (Insurance Regulatory and Development Authority) will soon clear it. Rest of the DRHP is ready. To a lot of extent, we have been actually running it with SEBI because of the size and all that,” he said.
With an embedded value of “more than Rs 5 lakh crore”, the market valuation of LIC is likely to be in the range of Rs 15-20 lakh crore. That would place LIC in the league of companies such as Reliance Industries and TCS, which have market valuations of Rs 16 lakh crore and Rs 14 lakh crore, respectively. At present, these two are the top companies by market capitalisation in the Indian market.
Apart from the sale of IDBI Bank, and the IPO of LIC, the government is also hopeful of the sale of BPCL, he said.
“The point is that it is a large transaction and we need multiple bids. We have multiple investors. They should be ready for financial bids. We are persuading them for that. In between, it has been caught up in energy transition issues. There has been a lot of discussion of refining, what is the future, de-carbonisation etc,” Pandey said.
“The due diligence stage has been extended. But the bidders have got to be ready. We would have liked it to be concluded in this financial year, but it will stretch,” Pandey added.