The Indian government might undertake some tax waiving measures to attract more bidders for a majority stake sale in IDBI bank. In case IDBI bank's share price rises post the final bid, the buyer will be required to pay extra tax under an existing clause. This is where the government plans to introduce waivers, sources have told Reuters.
It is not unusual for the share price to increase after the government invites financial bids for the underlying company. The officials quoted in the report state that it would be "unfair" to ask the new buyer of IDBI bank to pay tax on the increase in share price. The proposed waiver will make the divestment offer more appealing to the bidders.
Currently, the state-owned Life Insurance Corporation (LIC) and the Union government together owns about 95 per cent stake in IDBI Bank. They seek to sell 60.72 per cent of IDBI Bank and had invited bids for the same back in October.
The Department of Investment and Public Asset Management (DIPAM) had earlier extended the deadline for initial bids from 16 December to 7 January. According to guidelines issued by DIPAM, the potential buyers should have a minimum net worth of ₹22,500 crore.
Further, the bidders must have reported a net profit in three out of the last five years to qualify for the bidding process.