IDBI Bank stock zooms 11%; here’s why

Shares of IDBI Bank surged 11% in early trade today after the government said IDBI Bank's strategic sale process has started and that both the Centre and LIC will offload over 60% stake in the bank. The stock opened a gap-up, with a gain of 7.03% today and touched an intraday high of ₹47.4 (11.01%) in the early trade, outperforming the sector by 9.25%.

The IDBI Bank stock is in the mildly bearish range and is currently trading higher than the one-week, 20-day, 50-day, 100-day and 200-day moving averages. With the current share price, IDBI Bank's m-cap has also surged to ₹50,375.00 crore, with 29.07 lakh shares exchanging hands at the counter against the two-week average of 6.85 lakh.

The stock has risen 11.74% in the past week; 6.51% in the past month, while it's down 1.48% and 1.69% in the 6-month and year-to-date period. At 12.49 PM, IDBI Bank share was trading at ₹46.90, up 4.20 points or 9.84%, at the NSE.

The Centre last week issued the preliminary information memorandum (PIM) for inviting expressions of interest (EoI) to kickstart the IDBI Bank sale process. After the strategic disinvestment, the centre will sell such a 30.48% stake and LIC will sell a 30.24% stake, aggregating to 60.72% in IDBI Bank, the details shared on the exchanges suggest.

The last date for submission of written queries by PIM is 28 October while the due date for submission of the EoI is December 16.

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.

The Centre engaged KPMG India as the transaction advisor and Link Legal as the legal advisor for providing advisory services and managing the transaction. The IPs – i.e. private-sector banking companies, foreign banks, non-banking financial companies, entities registered with SEBI as an alternative investment fund or an investment vehicle incorporated outside India – are allowed to submit EoIs and participate in the bidding process for the transaction, either individually or as a part of the consortium.

The PIM debars large industrial or corporate houses from the bidding process. The financial criteria for submitting the EoI and for being considered for the RFP stage of the transaction, a minimum net worth of ₹22,500 crore is needed.

IDBI Bank's shareholding pattern shows LIC is a majority stakeholder in it and holds 49.24% equity share. The government is a co-promoter with a 45.48% stake. Together, they account for about 94% stake in the bank. LIC is currently the promoter, with management control, and the government is the co-promoter. 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.

Separately, IDBI Bank has signed an MoU with Vay Network Services as its first fintech partner for e-SCF (end-to-end digitalisation) services. IDBI Bank has an existing CMS and e-Trade platform and with the introduction of e-SCF the Bank aims to provide complete digital solutions to Corporate Banking and MSME clients.