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The government will soon notify the exemption period for meeting the public-shareholding norm for the prospective owner of IDBI Bank, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey told Business Standard.
He said the government would make a complete exit from IDBI Bank when it received the “upside value” on the remaining stake after acquisition.
He said the government had received interests from both global and domestic investors to acquire a majority stake in the bank in the first such transaction in the banking sector. The senior bureaucrat expects to close the deal by September-October.
“We have to decide now on the time period. We can’t go on making changes after we decide on changing hands. At a certain stage of the deal we will give it. It will be notified for what period they (the new owners) are exempt,” he said.
Indications are the notification might come before inviting the financial bids for the deal.
The government had recently notified it reserved the right to exempt public-sector enterprises from the minimum public shareholding norm even after a change in ownership.
Following this, the Securities and Exchange Board of India (Sebi) allowed the Central government to classify its stake in IDBI Bank as “public” but also directed that the new buyer should comply with public-float norms within a year of the sale.
Senior bureaucrat explained that even though IDBI is exempted till 2024 and now in the rule is also clarifies that even if it is changing the character that doesn’t mean that initial exemptions should not be there.
He said the government could not give an exemption for private companies. So, if at all whatever time we have to give we will have will be required to give time now, he emphasised.
On Sebi’s condition on meeting minimum public shareholding in a year, Pandey said it was a standard and generic rule and applied to all listed entities — private or public — whenever there was a new acquirer.
However, the issue is that the government can give till it is a public sector character.. and utill the time government has the power to exempt or give time.
At present, the MPS criteria is not met In IDBI case and government has given exemption. So we need to decide even if deal does not come as we assume. …It is a promoters work to save the company. And then the public float goes in the reverse direction, he said.
Complete exit from IDBI
He said that government intends to exit completely as we are not into the commercial business of banking, but there is no timeline or roadmap being committed to acquirer on the exit plan. “The exit plan will depend on when we could be able to monetize the partial stake, Pandey said.
The government offer to sell 30.48 per cent and LIC will offload 30.24 per cent stake, aggregating to 60.72 per cent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank. After stake sale, the combined shareholding of LIC and the government will come down to 34 per cent.
Received good response on IDBI EoIs
On the expression of interest, the Secretary said that the preliminary bids have received good response. It said the process moved to second phase which includes due diligence of the EoI and an assessment of RBIs’ fit and proper process. Saturday was the deadline to submit first bids for buying a stake in private sector lender.
Sources said that at least 5 bidders have submiited their bids.
On valuation, he said in a competitive bidding process, we want a non collusive bidding. We also do not want the bidders to know what are the other bidders, we want the best price for them for our shares. So therefore, I think the process runs like where nobody knows who else is there. On arriving at pricing, that’s the process we decide after inviting financial bids keeping in mind the fluctuation in market price.
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