Merchant bankers estimate 52 weeks for IDBI Bank’s strategic sale

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According to sources, the majority of merchant bankers who filed bids for assisting the strategic sale of LIC-controlled IDBI Bank suggested that the lengthy procedure would take one year to complete.

According to market sources, most eligible transaction advisers suggested a timeframe of 50-52 weeks to complete multiple stages of the privatization process of IDBI Bank during a recent presentation before the Department of Investment and Public Asset Management (DIPAM).

The government, on the other hand, plans to finalise the transaction during the current fiscal year. As a result, the merchant banker has around 26 weeks or six months to locate a buyer.

As many as seven offers were received, according to market sources: Deloitte Touche Tohmatsu India LLP, Ernst & Young LLP, ICICI Securities Ltd, JM Financial Ltd, KPMG, RBSA Capital Advisors LLP, and SBI Capital Markets Ltd.

In June, DIPAM, on behalf of the Indian government, issued a tender seeking bids from transaction advisers from reputable professional consulting firms, investment bankers, merchant bankers, and financial institutions for facilitating and aiding IDBI Bank’s strategic disinvestment. The final date to submit was July 13.

Market sources said KPMG submitted the lowest bid of Re 1 and was chosen as the transaction consultant, adding that the business will assist the government in the sale for Re 1.

In May, the Cabinet gave its in-principle permission for IDBI Bank’s strategic disinvestment and management control transfer.

IDBI Bank is owned by the national government and the Life Insurance Corporation of India (LIC). LIC presently has management authority over 49.24% of the company, while the government owns 45.48%. 5.29 percent of non-promoter shares are held by non-promoters.

The transaction advisor’s responsibilities would include advising and assisting the government on disinvestment modalities and timing, recommending the need for other intermediaries in the sale/disinvestment process, and assisting in the identification and selection of the same with proper Terms of Reference.

The advisor will also assist IDBI Bank in setting up an e-data room and ensuring that the due diligence process runs well.

According to the RFP’s eligibility criteria, bidders must have advised on at least one strategic disinvestment/strategic sale/M&A activities/private equity investment transaction with a value of Rs 5,000 crore or higher between April 2016 and March 2021.

The government had previously stated that the amount of shares to be relinquished by the central government and LIC would be determined at the time of transaction structuring in collaboration with the RBI.

In January 2019, the insurance behemoth LIC bought a majority share in IDBI Bank.

In her Budget for 2021-22, Finance Minister Nirmala Sitharaman stated that the IDBI Bank privatisation process would be finished this fiscal year.

The government hopes to raise Rs 1.75 lakh crore from minority stake sales and privatisation during the current fiscal year. Rs 1 lakh crore would come from the sale of government stakes in public sector banks and financial institutions, and Rs 75,000 crore will come from CPSE disinvestment proceeds, for a total of Rs 1.75 lakh crore.

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