The Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.
The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.
The last date for submission of bids by both transaction advisor and legal advisors is July 13, the Department of Investment and Public Asset Management (DIPAM) said.
The transaction advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference.
The transaction advisor will also assist in the preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows to generate interest among the prospective buyers and suggest measures to fetch the optimum value.
The advisor would also be supporting IDBI Bank in setting up an e-data room and assisting in the smooth conduct of the due diligence process.
The extent of shareholding to be divested by the central government and LIC shall be decided at the time of structuring of transaction in consultation with the RBI, the government had earlier said.
Insurance giant LIC had acquired a controlling stake in IDBI Bank in January 2019.
Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal.
The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.
Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions, and Rs 75,000 crore through CPSE disinvestment receipts.
Under the PCA imposed by RBI in 2017, the bank’s balance-sheet shrank as it could not extend loans to corporates and was not allowed to open branches.
It used the four years of PCA to restructure its business, cut exposure to large loans and bulk deposits and create verticals for various lending businesses to speed up turnaround time.
The bank has worked for the last four years on various parameters, done recoveries and raised its provision coverage ratio to 97%.
The lender was looking at Rs 4,000 crore of recoveries in this fiscal.
The share of corporate loans, which was about 67% four years back when it went under PCR, has shrunk to 40% now with 60% loans being retail. The bank is now targeting 55% loan book as retail and rest corporate. It wants to maintain low costs retail deposits at 48% of total deposits.
As a result, the institution has transformed from a project financier to a retail lender.
The company is looking to target the mid-corporate segment and will now avoid overexposure to certain industries and grow the business in a calibrated manner.
It sees over 12% growth in retail loans and an 8-10% rise in corporate loans.