Regulatory forbearance offered to IDBI Bank buyer

Public float tag for post-sale govt stake; No curbs on restructuring of arms

Regulatory forbearance offered to IDBI Bank buyer
It also said that certain asset sizes and timing thresholds related to asset stripping would be provided to give flexibility in operations to the successful bidder.

The government’s residual 15% stake in IDBI Bank post the strategic disinvestment of the lender will likely be considered as ‘public shareholding’ and a reasonable period may be given to the potential buyer to comply with minimum public shareholding (MPS) norm, the finance ministry said on Sunday. IDBI Bank will continue to operate as an ‘Indian private sector bank’ after its strategic sale, it added.

The department of investment and public asset management (Dipam) also said that the winning bidder will have no restriction on undertaking a corporate restructuring of the subsidiaries of the bank. It also said that certain asset sizes and timing thresholds related to asset stripping would be provided to give flexibility in operations to the successful bidder.

“The aspects in respect of the treatment of GOI’s residual shareholding and the appropriate transition period for MPS compliance are under due consideration and would, accordingly, be suitably advised to the QIPs (qualified interested parties) at the RFP (request for proposal) stage,” the Dipam said responding to a batch of 167 queries from potential buyers of IDBI Bank.

On October 7, the Centre invited expressions of interest (EoIs) for IDBI Bank and offered to sell a total of 60.72% stake in the bank, including 30.48% from the government and 30.24% from LIC, along with the transfer of management control in IDBI Bank. Yet, both the government and LIC together will have a 34% residual stake in the lender (19% by LIC and 15% by the government).

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The market regulator Sebi’s expected relaxation will make it easier for the potential buyer to meet the MPS norm and thereby improve investor interest in the entity.

The government is also reasonably assured that the regulator would give five years or more against the norm of one year to the buyer to comply with the MPS norm of 25% in the lender given its long history of public sector or deemed public sector status, sources had told FE earlier.

According to the Sebi norms, a company is required to have a minimum public holding of 25% within one year of the merger with/acquisition of a private company or three years after listing.

The government has structured the stake sale in such a way that the buyer can potentially increase its stake to about 66% by acquiring the 5.28% held by the public via an open offer.

Sebi’s likely categorisation of the Centre’s residual stake of 15% in the lender would mean that the new promoters of the bank would have to just offload another 10% to meet the public float norm of 25%.

Responding another query, the DIPAM further said IDBI Bank is presently handling Indo-Iranian trade transactions bilaterally under the Rupee Payment Mechanism (RPM) for goods of humanitarian assistance — medicines, medical devices, agricultural commodities and food items.

“Suitable arrangements regarding the continuity of this Rupee Payment mechanism will be considered at the RFP stage,” it added.

The ownership of the brands / logos / trademarks / trade names used by IDBI Bank, rights to which are owned by it presently, shall continue to vest with the lender (and its subsidiaries) post consummation of the transaction.

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First published on: 28-11-2022 at 05:00 IST