Financial bids for the strategic sale of IDBI Bank are expected between May and June following the finalization of the share purchase agreement (SPA). The Department of Investment and Public Asset Management (DIPAM) received multiple expressions of interest (EOIs) on January 7, 2023, for a 60.72% stake in the bank. This includes 30.48% held by the government, valued at approximately Rs 23,700 crore at current market prices, and 30.24% held by LIC, along with management control.
Among the bidders reportedly in contention are Fairfax India Holdings, Emirates NBD, and Kotak Mahindra Bank. Following security clearance from the Ministry of Home Affairs and the Reserve Bank of India’s evaluation of bidders, the due diligence process is nearly complete, and discussions on the SPA are in the final stages. The agreement is expected to include provisions ensuring that the new owner has operational control, including management changes, while addressing the concerns of existing employees and stakeholders.
Under the Banking Regulation Act of 1949, voting rights of shareholders in a bank cannot exceed 26%, even if their ownership stake is higher. The government aims to structure the transaction to ensure a smooth transition while maintaining compliance with regulatory provisions.
This deal is set to be the largest in India’s banking and financial services sector and the second-largest overall, following Walmart’s acquisition of a majority stake in Flipkart for $16 billion in 2018. The government anticipates securing a premium over IDBI Bank’s current market valuation, considering its financial turnaround and strong performance in recent years. The bank reported a 31% year-on-year increase in net profit, reaching Rs 1,908 crore for the December quarter. Net non-performing assets (NPAs) declined to 0.18% from 0.34% in the same period the previous year.
At its last recorded market price of Rs 72.65 per share, the 60.72% stake in the bank is valued at around Rs 47,400 crore, with expectations of an additional premium. After the sale, the government and LIC will retain a combined 34% stake in the bank—19% with LIC and 15% with the government. Plans are in place for the government to gradually divest its remaining 15% stake through an offer for sale, potentially benefiting from future increases in the bank’s share price.
