InvestorQ : Can you tell me about when does the government plan to hive off the IDBI Bank stake?
Anu Biswas made post

Can you tell me about when does the government plan to hive off the IDBI Bank stake?

Ria Jain answered.
2 months ago

To get quickly to its disinvestment target of Rs65,000 crore for FY23, government is planning to fast track the sale of IDBI Bank stake. It may be recollected that the total stake of the government in IDBI Banks is 94%, but this held by LIC and the government of India. While modalities are yet to be worked out, it is reported that the government may look to sell a total of 51% in IDBI Bank; between LIC and the government. This will also allow the buyer to get management control of IDBI Bank, which is the key to buyer interest.

The government needs to cross a few more steps. A panel of ministers will have to make the final decision on the structure of the deal. The government and LIC will gauge buyer interest and for that they must appoint merchant bankers to give them a first-hand assessment. Institutional appetite and institutional support will be the key to the sale. Additional approvals are required if more than 40% stake has to be sold to a single regulated entity. This can be exempted specifically by an order of the government.

This will smoothen the journey to the divestment target for FY23. Government has already raised Rs21,000 crore from the LIC issue and is likely to get another Rs36,000 crore booster dose from the sale of its stake in Hindustan Zinc. How much will IDBI Bank contribute? IDBI Bank has a market cap of Rs46,000 crore, so even if 51 % is sold, more than Rs23,000 crore would be received. Of course, the catch is that this is the money that belongs to LIC and to the government of India, so the split needs to be worked out.