IDBI officials said that the decision will be taken by end-September and the decision of its management will prevail over that of IDBI Bank. The issue is being termed as parental indecision, but we term this as sibling indiscipline. But, its a family matter and it will be settled amicably, sources said.
Major issues include IDBI Banks top management being given 3 per cent by way of ESOPS, which should go up to 6 per cent in the next three years.
Chrysalis Capital, Ankaar Capital and New Bridge Capital were in talks for picking up a 26 per cent stake in IDBI Bank. IDBIs stake in the bank is pegged at around 57.14 per cent and another 14 per cent is held by the Small Industries Development Bank of India (SIDBI).
IDBI may also exercise the option of selling a maximum of 13 per cent in the bank to SIDBI at around Rs 26 a share, as per the Securities and Exchange Board of Indias pricing formula.
In the event of a merger with IDBI Bank, IDBI could buy back this stake from SIDBI at the market price or will offer a 12 to 15 per cent rate of return. In case IDBI decides to offload its stake then, SIDBI could offload its stake to a strategic investor.
As part of the shareholders agreement, investors have asked for a commitment from IDBI, that it will not reverse merge with the bank within 12 months of stake dilution. An IDBI official said that this should be left to them to decide.
And in the case of a merger of IDBI Bank with another bank, parent IDBI will have to sell 30 per cent of its remaining 40 per cent stake (after placing the 26 per cent stake) to them at a premium of 10 to 15 per cent, they have said.
In other words, IDBIs shareholding will then be reduced to around 10 per cent in the bank. IDBI can, alternately, buy back the 26 per cent stake sold to them at a pre-determined price which is at a 30-35 per cent premium. IDBI officials said these conditions are not acceptable to them.
The agreement cannot be one-sided. In case of a merger, foreign institutional investors want to take over the bank at a 10 per cent premium. Alternately, we will have to buy back from them at 30-35 per cent premium, sources said, adding that although IDBI is interested in divesting itself fully from the bank, it wants to enjoy some comfort till it itself merges with another major bank. If the merger with a public sector bank does not go through, IDBI wants to keep IDBI Bank as the last option. sources said. According to the revised guidelines issued by the RBI on the holding pattern of a new private bank, the promoters stake can be kept at 49 per cent. The preferential allotment would also have helped IDBI Bank to raise its capital adequacy ratio, which is currently at 9 per cent.