SEBI allows Centre's stake in IDBI Bank to be reclassified as 'public' after sale

The Securities and Exchange Board of India (SEBI) has allowed the government's shareholding in IDBI Bank to be reclassified as "public" post disinvestment on condition that its voting rights do not exceed 15% of the total voting rights of the bank.

The market regulator has also directed the new buyer to comply with minimum public shareholding norms within one year of the sale, the lender said in a stock exchange filing.

Currently, the government is a co-promoter, with a 45.48% stake in the lender. Life Insurance Corporation of India (LIC) is a majority stakeholder with 49.24% equity share. LIC had first acquired a stake in debt-laden IDBI Bank in 2018 and over the years it raised its shareholding and became a majority stakeholder.

The intention of the government to get its shareholding re-classified as public holding shall be specified in the letter of offer dispatched to the shareholders of IDBI Bank in connection with the open offer made by the new acquirer, the lender said.

The central government and LIC together plan to sell 60.72% shares in IDBI Bank and had invited bids from potential buyers in October. As part of the disinvestment plan, the Centre will offload a 30.48% stake in the lender, while Life Insurance Corporation of India (LIC) of India will sell 30.24% in IDBI Bank. LIC and the government currently own 49.24% and 45.48% stakes, respectively, in IDBI Bank, while the remaining 5.29% shares are owned by retail investors.

Reclassification of the government's remaining 15% shareholding in IDBI as "public" will help the new buyer in meeting the mandated 25% minimum public shareholding norms.

This comes weeks after the government extended the deadline to submit preliminary bids for the privatisation of the lender. The Department of Investment and Public Asset Management (DIPAM) on December 15 revised the timeline to submit an Expression of Interest (EoI) for the privatisation of IDBI Bank to January 7, 2023, from December 16, 2022. Also, the deadline to submit physical copies of the EoIs was extended to January 14, from December 23.

The sale process started more than a year after the Cabinet Committee of Economic Affairs (CCEA) gave its approval to the government and LIC to sell 100% of its stake in IDBI Bank, along with a transfer of management, in May 2021.

As per the eligibility norms, private sector banks, foreign banks, non banking finance companies, Alternative Investment Fund (AIF) are eligible to participate in the strategic sale of IDBI Bank. Big corporate houses have been barred from the bidding process. The financial criteria for submitting the EoI and for being considered for the request for proposal (RFP) stage of the transaction, a minimum net worth of ₹22,500 crore is needed.