Centre looks to woo top US investors for stake sale in IDBI Bank

Senior officials to meet investors in US, seek feedback

The Centre is looking to woo top global investors for the sale of its stake in IDBI Bank as a team of senior government officials visits the United States for roadshows this week. 

Department of Financial Services (DFS) Secretary Sanjay Malhotra, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey, senior government officials, and Life Insurance Corporation of India (LIC) Chairman M R Kumar will be present in roadshows in the US from June 1-3.

There is interest among US investors to participate in the Centre’s next key privatisation bid, said a senior government official. The government would address their queries and concerns, and seek their feedback on how the process should move forward, the official added. 

“The government has already held discussions with the Reserve Bank of India (RBI) on the structuring of the IDBI Bank sale, and we now want to take feedback from investors and discuss their concerns with the central bank,” the official said. 

In its previous roadshows, the Centre had communicated to investors that it was ready to resolve and address any hurdle or hiccup that cropped up around the privatisation process, said the official. 

Divestment bid

• Roadshows planned in US on June 1-3
• There’s interest among US investors to participate in IDBI Bank divestment
• Centre, RBI to talk on glide path for new buyer’s stake dilution after sale
• The Centre owns 45.48% in IDBI Bank; LIC holds 49.24%

Although the Centre is yet to decide the quantum of the stake it will sell in IDBI Bank, along with LIC, it is in talks with the RBI on the share the new buyer shall hold, and a glide path to lower the stake over a period. 

As per the current guidelines for ownership of banks, promoters have to lower their shareholding in banks to 26 per cent in 15 years. However, some relaxation may be provided to the new buyer of IDBI Bank—for the glide path—keeping under consideration the continuity in running operations of the lender. 

The consultation with the Securities and Exchange Board of India (Sebi) is also underway on maintaining minimum public shareholding after the sale.

“Investors would need clarity over the glide path, and the same would be discussed with investors first. The feedback would then be discussed with the RBI to decide the best possible fit,” the official said. 

Before making any investment decision, the new buyer shall need certainty on control over the bank to turn it around, and then dilution of shareholding, the official added. 

The government currently owns 45.48 per cent in IDBI Bank, while LIC holds a 49.24 per cent stake.

So far, a decision has only been taken to not grant any special dispensation to the new buyer, and cap voting rights at 26 per cent, even if an investor picks up a 50 per cent stake or more.

As the Centre looks to invite expression of interest (EoI) for the strategic divestment of IDBI Bank by June end, these roadshows will be the key to gauging interest among investors for the lender. In preliminary interactions, there has been interest among US investors to pick up a stake in the lender, the official said. 

Though geopolitical tensions persist, sentiment among investors is improving. Even as large investors skipped most Indian initial public offerings (IPO), they are again looking to invest in India as it is now the most preferred investment destination among the BRICS nations.