NEW DELHI: As the government is planning to divest its stake in the IDBI Bank, it is considering allowing consortiums also to bid for the bank to get better valuation and generate more interest in the bidding process.
According to the sources in the ministry of finance, Department of Investment and Public Asset Management (DIPAM), in an internal discussion held last week, including the transaction advisors and other stakeholders, the general consensus was to allow the consortium to participate in the bidding process, so that they can garner maximum interest on the bidding.
“The general consensus, including all advisors is that the government should allow consortiums to participate in the bidding process. This was not allowed earlier. However, the consortiums will be as per the guidelines decided by the RBI. There is already discussions ongoing with the central bank on deciding on the fine prints regarding the IDBI divestment,” a finance ministry official told The New Indian Express.
According to the official, the department had already sought clarifications from the RBI, if business houses will be allowed to participate in the bidding process. However, RBI had already conveyed its reluctance to do so.
“Being a bank, IDBI comes under the RBI jurisdiction so naturally the final shape of expression of interest will depend strictly on what RBI allows as per its rulebook. The discussion with the central bank is likely to be concluded by mid of November as the target is to come up with EoI ahead by December,” the official added.
The government has already given its nod for selling the entire stake in the private bank with transfer of management. LIC as a promoter owns 49.24% stake, whereas the government has 45.5% stake. Another sticking point with IDBI divestment is its low market valuation, which is roughly about Rs 64,000 crore. The Centre is expecting its valuation at least above Rs 83,000 crore. As the bank is already out of RBI’s prompt corrective action framework and has turned profitable for the first time in five years, the govt expects its valuation to enhance further.
Final shape of EoI to be decided as per RBI rule
According to a finance ministry official, the discussion with the central bank is likely to be concluded by mid of November as the target is to come up with EoI ahead by December