The setback in the lender’s strategic sale comes as financial bids came in below the floor price set by the government, people familiar with the matter told The Economic Times. If the Centre decides to continue with the sale, it may have to restart the bidding process, one of the sources said.
Back in May 2021, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, gave its in-principle approval for strategic disinvestment along with the transfer of management control in IDBI Bank.
In 2023, the government and Life Insurance Corporation (LIC) decided to offload a little over 30% each in IDBI Bank. The Centre and LIC own more than 94% stake in IDBI Bank – the former owning 45.48% and the latter holding 49.24% stake in the private lender.
While the government didn’t name the suitors, Prem Watsa’s Fairfax Financial and Emirates NBD had reportedly submitted financial bids. Earlier in February, Kotak Mahindra Bank clarified that it had not submitted a financial bid for the disinvestment process relating to IDBI Bank.
The sale of a 30.48% stake in IDBI Bank could fetch the government about Rs 30,215 crore, as per the stock’s closing price on Friday. The government has been working to reduce its stake in IDBI Bank as part of a broader privatisation and asset-monetisation agenda, with the divestment seen as a key test case for strategic sales in the banking sector.
An outright cancellation of the strategic sale of IDBI will make it difficult for the government to reach its FY27 disinvestment and asset monetisation target of Rs 80,000 crore.The private lender’s shares tumbled 15% to trade at Rs 78.42 apiece on NSE, nearing their 52-week low of Rs 71.90 apiece which they hit in March last year.
(With inputs from agencies)