IDBI Sale – 7 Companies bidding for share

Seven companies have submitted bids to manage the strategic sale of IDBI Bank, including JM Financial, Ernst & Young, and Deloitte.

According to a notice from DIPAM, these firms will make a virtual presentation on August 10 to the Department of Investment and Public Asset Management, which is overseeing the sale process. Deloitte Touche Tohmatsu India LLP, Ernst and Young LLP, ICICI Securities, JM Financial Ltd, KPMG, RBSA Capital Advisors LLP, and SBI Capital Markets have all submitted bids to function as transaction advisor.

DIPAM would choose a single transaction advisor to assist in the strategic sale of IDBI Bank, which the central government and LIC own in excess of 94%. LIC presently controls 49.24 percent of the bank, while the government owns 45.48 percent. 5.29 percent of non-promoter shares are held by non-promoters. The precise amount of stake dilution will be determined later.

In June, the government invited bids from reputable professional consulting firms/investment bankers/merchant bankers/financial institutions/banks to facilitate/assist DIPAM in the process of strategic disinvestment of IDBI Bank Ltd., including management control transfer, until the transaction is completed. The deadline for submitting bids was July 13, but was later extended till July 22.

The Transaction Advisor would be responsible for advising and assisting the government on disinvestment modalities and timing; recommending the need for additional intermediaries necessary for the sale/disinvestment process, as well as assisting in identifying and selecting the same with appropriate Terms of Reference; preparing all documents such as the Preliminary Information Memorandum (PIM), and organising roadshows.

Additionally, the advisor will assist IDBI Bank in establishing an electronic data room and assisting in the smooth conduct of the due diligence process. This will assist in positioning the divestment of GoI equity in IDBI Bank by organising roadshows and generating interest among prospective buyers.

In May, the Cabinet approved the strategic sale of the government’s and Life Insurance Corporation’s (LIC) whole share in IDBI Bank Ltd.

In response to inquiries from potential transaction advisors at IDBI Bank, the DIPAM explained last month that because LIC’s stake would be sold alongside the government’s, the entire share sale process would be managed by a single transaction advisor.

The amount of stake dilution would be disclosed prior to the transaction’s RFP (Request for Proposal) stage.

Nirmala Sitharaman, Finance Minister, had stated in her Budget for 2021-22 that the process of privatising IDBI Bank would be finished in the current year. The government intends to raise 1.75 lakh crore from minority stake sales and privatisation during the current fiscal year.

1 lakh crore would be raised through the sale of government stakes in public sector banks and financial institutions, while 75,000 crore will be raised through CPSE disinvestment revenues.

The government has so far collected 7,648 crore in disinvestment receipts during the current fiscal year.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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