Industrial Development Bank of India (IDBI) intends to divest or substantially reduce its holding in IDBI Bank over 12-15 months from the existing 58 per cent.
IDBI Bank has also firmed up a proposal to offer 31 per cent stake to foreign investors by issuing 6.3 crore equity shares which would reduce IDBI's stake in the bank to 39 per cent.
Sources, however, said the stakeholding details, discussed at a board meeting on Saturday, did not completely rule out the possibility of a merger between the financial institution and IDBI Bank.
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Some international financial majors such as Newbridge Capital have shown interest in picking up stake in the bank. Newbridge is learnt to have made a presentation to IDBI Bank.
Sources said the shareholders' agreement provides that the investors can sell their entire stake or a part of it at either 25 per cent price over the market price or exercise a put option, which would mean that they would be entitled to 40 per cent per annum returns over the investment price, whichever is higher.
They said the preferential allotment of 6.3 crore equity shares would have a lock-in clause of 12 months and the investors would have the right to veto any merger proposal with IDBI for 12 months from the allotment date.
The agreement also provides that in case IDBI merges with another bank, the investors would have permanent veto rights on a merger between the parent and IDBI Bank.
In case the investors do not agree to a merger with IDBI, the institution would have to sell its 39 per cent stake within six months of the decision.
The investors would be entitled to two berths on the board and would also play a consultative role in the appointment of the chairman and managing director.
IDBI Bank managing director Gunit Chadha refused to comment and said, "All I can say is we are talking to different investors at the moment." IDBI has appointed DSP Merrill Lynch to manage its preferential issue.
Though a valuation of shares has not been carried out, the bank hopes to mop up around Rs 350 crore through the issue of additional shares. The move follows the bank's plans to increase its business by about Rs 3,000 crore in 2002-03 as also the RBI directive to reduce IDBI holding in the bank to 40 per cent, though the level has been subsequently enhanced to 49 per cent now.
IDBI Bank, jointly promoted by IDBI with 80 per cent stake and Sidbi with 20 per cent share in 1994, is looking for a partner after its aborted deal offering of about 20 per cent stake to Bank of Muscat last year.
IDBI Bank has a capital of Rs 140 crore and a reserve of Rs 128 crore at the end of March 2001. IDBI Bank went for an initial public offer in February 1999 after which IDBI's stake came down to 57 per cent and Sidbi's pie decreased to 14.29 per cent. The remaining 28 per cent is currently held by institutions, foreign investors and public.