After the conclusion of the initial public offer of Life Insurance Corporation this week, the Centre will focus its attention on strategic disinvestment of IDBI Bank and Shipping Corporation of India (SCI).
Expression of interest (EoI) for IDBI Bank and financial bids for SCI are likely to be invited by August-September, sources said.
However, the strategic disinvestment of fuel retailer-cum-refiner BPCL is not moving forward and the government will likely soon reveal a revised plan for the company, the sources said.
The government has set a disinvestment target of Rs 65,000 crore for FY23. The ongoing LIC IPO, which is not part of the this year’s disinvestment target, will fetch the Centre about Rs 20,600 crore for its 3.5% stake sale in the insurer. Floating of EoI for IDBI Bank is next in line after LIC IPO.
Currently, LIC (49.24%) and the government (45.48%) together hold 94.78% stake in IDBI Bank worth about Rs 42,000 crore at the current market prices. Both the government and LIC plan to sell majority stake to a buyer and handover the management control.
The department of investment and public asset management is currently holding pre-EoI roadshows to gauge investors’ interest.
To make the deal attractive, the government has approached the Reserve Bank of India (RBI) to consider giving the potential buyer of IDBI Bank some leeway on complying with the regulatory norms for private banks, including a time-bound reduction in promoter holdings. It has also urged the Securities and Exchange Board of India (Sebi) to give some flexibility to the strategic investor in IDBI Bank on the minimum public float norm for listed companies.
As part of the SCI disinvestment process, the government is hiving off Shipping House building in Mumbai, MTI (Maritime Training Institute), Powai and some other non-core assets of the company.
“The process of the demerger is time-consuming. We would be ready to invite financial bids in 3-4 months,” an official said. The board of SCI recently approved an updated demerger scheme for hiving off the non-core assets of SCI to Shipping Corporation of India Land and Assets Ltd (SCILAL).
As per the balance sheet of SCI, the value of non-core assets held for demerger as of March 31, 2022, stood at Rs 2,392 crore.
In March 2021, the government had received multiple bids for acquiring the government’s 63.75% stake in SCI. Even though the current market prices of the government’s stake in SCI is worth Rs 3,700 crore, it is not clear how much the government will raise after hiving of non-core assets to the demerged entity.
State-run oil-refiner-cum-retailer BPCL’s privatisation, which has been held up for over a year, has hit a dead-end, as potential investors have turned more sceptical of the pricing freedom with state-owned fuel retailers, besides global shift for greener energy.
In November 2020, multiple bidders, including Vedanta, Apollo Global Management and Think Gas (I Squared Capital), showed interest in the government’s 52.98% stake in BPCL. However, US private equity firm I Squared Capital is reported to have dropped out of the race to buy the state-run oil firm, due to the complex deal structure and lack of financial backers for the transaction.
The market value of the Centre’s entire stake in BPCL is worth about Rs 41,000 crore at the current prices.