IDBI Bank strategic sale: 7 firms in race for transaction advisor

As many as seven firms, including JM Financial, Ernst and Young and Deloitte, have bid for managing the strategic sale of IDBI Bank.

These firms would make a virtual presentation before the Department of Investment and Public Asset Management, which is handling the sale process, on August 10, according to a notice by DIPAM.

The firms that have bid for acting as transaction advisor are Deloitte Touche Tohmatsu India LLP, Ernst and Young LLP, ICICI Securities, JM Financial Ltd, KPMG, RBSA Capital Advisors LLP and SBI Capital Markets.

DIPAM would appoint one transaction advisor for the strategic sale of IDBI Bank, in which the central government and LIC together own more than 94 per cent.

LIC, currently having management control, has a 49.24 per cent stake, while the government holds 45.48 per cent in the bank. Non-promoter shareholding stands at 5.29 per cent.

The exact quantum of stake dilution would be decided later.

The government in June invited bids from reputed professional consulting firms / investment bankers / merchant bankers / financial institutions / banks, for facilitating/assisting DIPAM in the process of strategic disinvestment of IDBI Bank Ltd. along with transfer of management control, till completion of the transaction. The last date for bid submission was July 13, which was later extended till July 22.

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; preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows, suggest measures to fetch optimum value.

The advisor would also be supporting IDBI Bank in setting up of the e-data room and assisting in the smooth conduct of the due diligence process, will help position the divestment of GoI equity in IDBI Bank to organize roadshows and to generate interest among the prospective buyers.

The Cabinet in May had approved the strategic sale of the entire stake of the government and Life Insurance Corporation (LIC) in IDBI Bank Ltd.

In response to queries received from potential transaction advisors in IDBI Bank, the DIPAM had last month clarified that since LIC's stake would be sold along with that of the government's, a single transaction advisor would manage the entire share sale process.

The quantum of stake dilution would be declared before RFP (Request for Proposal) stage of the transaction.

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 while Rs 75,000 crore would come as CPSE disinvestment receipts.

So far in the current fiscal the government has mobilised Rs 7,648 crore as disinvestment receipts.