IDBI Bank Privatisation: Govt nears Rs 64,000 cr sale; Kotak, Emirates NBD lead bids
A significant financial move by the government has created a stir in the banking sector. Major domestic and foreign players are quietly active, and control of thousands of crores is at stake. This story will reveal which giants are eyeing this opportunity and how the situation may change.
New Delhi: IDBI Bank, which the Indian government has been trying to sell for many years, might possibly see its sale soon. The government has planned to earn about Rs 64,000 crore by selling its majority stake in IDBI Bank Limited. All the preparations for the bid are almost complete. According to people familiar with the matter, negotiations with potential contenders are in the advanced phase. A government agency can formally start the bidding process this month. If this transaction is completed, then after decades a government bank will move towards privatisation.
The Indian government is aiming to sell 60.72 percent stake in IDBI Bank, which is equivalent to about 7.1 billion dollars i.e. about Rs 64,000 million at the current market value. This bank, which was once heavily debt-ridden, has emerged in recent years after massive cleanup and has returned to profit after drastic reductions in NPAs from capital assistance and aggressive recoveries. Due to obstacles such as delays in obtaining regulator approvals, the government missed the predetermined timeline to complete the sale. Government officials have repeatedly indicated that the disinvestment process will be completed in the financial year ending March 2026. In a written reply to questions in Parliament this week, the Minister of State for Finance said that the selected bidders are currently doing due diligence.
Government’s and LIC’s stake in IDBI
Bloomberg quoted sources saying that Kotak Mahindra Bank Limited, Emirates NBD PJSC and Fairfax Financial Holdings Limited had shown so-called expression of interest in IDBI Bank and had to meet appropriate criteria by the country's central bank. Interest expression is the first step in the bidding process. However, there can be no financial bid on its sale. The central government and the public sector's Life Insurance Corporation of India (LIC) together hold about 95 percent stake in this bank. The government will sell its 30.48 percent stake in the bank, while LIC will sell 30.24 percent stake with the transfer of management control. There is no statement from India's Finance Ministry, LIC, IDBI Bank, Kotak and Fairfax.
Uday Kotak at the forefront
According to Bloomberg sources, it has been said that Kotak, supported by Asia's richest banker Uday Kotak, is considered at the forefront of bidding for IDBI Bank. Nevertheless, he said that the lender has indicated in the negotiations that it will not attempt this deal at an increased price. Jefferies said in a note at the end of last month that mergers and acquisitions could significantly enlarge the size of Kotak. However, if the government asks for cash for this deal, it can affect Kotak's capital and the profits of the merged bank.
According to sources, Canadian billionaire Prem Vatsa's Fairfax, who is an active investor in many other companies in India, including companies like CSB Bank Limited, remains in the race. According to sources, one of the biggest lenders in the Middle East, Emirates NBD, which has recently announced a major deal to buy a majority stake in RBL Bank Ltd, has also considered participating in it. IDBI Bank's shares have risen by nearly 30 percent so far this year, resulting in its market value exceeding 1 trillion rupees ($11.6 billion).
Bloomberg News reported in 2022 that the government was pushing for a valuation of around Rs 640 billion rupees for the bank, a figure that has been exceeded for a long time due to the rise in its shares in anticipation of the acquisition. Although the winning bidder is expected to be announced by the end of March next year, the deal is still expected to be delayed until approvals and other approvals are received, according to sources.
The Indian government is aiming to sell 60.72 percent stake in IDBI Bank, which is equivalent to about 7.1 billion dollars i.e. about Rs 64,000 million at the current market value. This bank, which was once heavily debt-ridden, has emerged in recent years after massive cleanup and has returned to profit after drastic reductions in NPAs from capital assistance and aggressive recoveries. Due to obstacles such as delays in obtaining regulator approvals, the government missed the predetermined timeline to complete the sale. Government officials have repeatedly indicated that the disinvestment process will be completed in the financial year ending March 2026. In a written reply to questions in Parliament this week, the Minister of State for Finance said that the selected bidders are currently doing due diligence.