The government's plan to sell a majority stake in IDBI Bank is set to pick up pace this year after scrutinising potential suitors last year. These include Fairfax Financial, Emirates NBD, Oaktree Capital, and Kotak Mahindra Bank.
They are set to gain access to confidential data of the bank after undergoing a “fit and proper” test in the last 12 months, as reported by The Economic Times. Citing officials, it's said that the bidders will get access to data like top borrowers of the bank, its exposure, provisioning, and bad loans via a data room hosted through the cloud. Following this, the bidders will submit their offers to buy IDBI Bank.
While the government earlier planned to close the disinvestment deal by the end of this financial year, the report says it may drag on to the first half of FY25.
Slow disinvestment process
The Centre, together with Life Insurance Corporation (LIC), owns 95% stakes in the lender. They plan to sell 60.72% stakes in IDBI Bank, including management control. The process of privatising IDBI Bank was announced in the 2021-22 budget.
It came on the back of turbulent years for the lender, where high NPA and capital adequacy issues forced the government to infuse more money and sell part of its stakes to LIC. In 2019, the Reserve Bank of India categorised the lender as a "private sector bank," while remaining in control of the government. It was also put under the Reserve Bank of India's Prompt Corrective Action.
In January 2023, the Union government invited Expressions of Interest (EoIs) from potential suitors. It received only four proposals by January 2024 amid muted interest from global investors. Now, as per The ET, the next steps after due diligence and sharing a draft share purchase agreement with prospective bidders will be submitting financial bids.
Amid the long disinvestment process, the IDBI bank has seen a financial turnaround. After coming out of RBI's Prompt Corrective Action in 2021, it has seen a rise in deposits and profit. The bank reported a 31% jump in its consolidated net profit for the October-December quarter on January 20. Its gross NPA has also come down from 3.57% from earlier 3.68% in the last quarter.
