Large corporates have been disallowed from being even a minority shareholder in consortium wanting to bid for 61 per cent stake in IDBI Bank, as the current RBI norms bar industrial houses from becoming bank promoters, an official said.
Currently, RBI guidelines allow industrial houses to hold a maximum of 10 per cent stake in private sector banks, but they cannot be a promoter.
Last week, the government along with Life Insurance Corporation (LIC) invited Expression of Interest (EoI) for selling 60.72 per cent stake in IDBI Bank. However, it barred large industrial houses from participating in the strategic sale.
As per the bid document, 'large industrial/corporate houses' has been defined an industrial/ corporate group with assets of Rs 5,000 crore or more with the non-financial business of the group accounting for 40 per cent or more in terms of total assets/ gross income.
An official said that corporate houses have not been permitted to participate in the bidding process for IDBI Bank transaction as the Reserve Bank of India (RBI) regulation clearly says that they cannot be the promoter entity in any bank.
"As per the IDBI Bank bid document, the consortium, if they emerge as the winning bidder, would be classified as the promoter. Allowing corporate houses as part of the consortium member would mean they are part of the promoter group which is not allowed as per RBI guidelines," the official said.
The RBI would be the final deciding authority on whether the interested bidder belong to a large industrial house or to a company connected to a large industrial house.
The last date for putting in EoI for IDBI Bank is December 16.
Once the EoIs come in and the interested parties clear RBI's 'Fit and Proper' assessment and gets Ministry of Home Affairs (MHA) security clearance, data room access would be given to qualified bidders. It is only after due diligence, that bidders would put in financial bids.
The official said that financial bids process is expected to be completed by the end of March next year and finally conclude the strategic sale by early next fiscal beginning April 2023.
Private sector banks, foreign banks, RBI-registered non-banking finance companies, Sebi-registered Alternative Investment Funds (AIFs), a fund/investment vehicle incorporated outside India would be allowed to submit bids, either individually or as consortium.
However, it barred large industrial/corporate houses or individuals from participating in the bidding process.
The net worth threshold for bidders has been kept at Rs 22,500 crore, and they must report net profit in three of the past five years. Besides, 40 per cent of the equity would have to be locked in for five years.
Currently, LIC holds 49.24 per cent stake in IDBI Bank, while the government holds 45.48 per cent stake. The remaining 5.2 per cent stake is with the public shareholders.
The combined stake of the government and LIC in IDBI Bank would come down from 94.72 per cent, to 34 per cent after the conclusion of this strategic sale.
The government will sell 30.48 per cent stake and LIC will offload 30.24 per cent, taking the total to 60.72 per cent, along with transfer of management control.
In case, the bidder intends to amalgamate IDBI Bank with itself, the government and LIC will vote for such amalgamation or merger at the board or shareholder meetings.
The announcement of IDBI Bank privatisation was first made in Union Budget of 2021-22, following which the Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in May 2021.
IDBI Bank was categorised as Private Sector Bank by the RBI with effect from January 21, 2019, consequent upon LIC acquiring 51 per cent of the total paid-up equity share capital of the bank.
Shares of IDBI Bank closed at Rs 46.55 apiece, up 9.02 per cent over previous close on the BSE. At the current market price, the sale of 60.72 per cent stake would fetch about Rs 30,000 crore to the exchequer.