Informist, Thursday, Jul 25, 2024

By Krity Ambey and Shubham Rana

NEW DELHI – The Reserve Bank of India should have expedited the evaluation of prospective investors for IDBI Bank to facilitate the proposed strategic sale, Divestment Secretary Tuhin Kanta Pandey said. The RBI has been conducting the 'fit-and-proper assessment' of the potential investors for more than a year now.

"My point is, it should have been faster. But for RBI also, it is a new exercise," Pandey told Informist. But now the process is at a very advanced stage, he said, adding, "Indications are that it (fit and proper report) should come very soon."

The strategic divestment of IDBI Bank is a first-of-its-kind exercise undertaken by the government and the RBI. Though IDBI Bank is categorised as a private sector bank by RBI, the strategic sale is expected to lay down a roadmap for future privatisation of other public sector banks. The government holds a 45.48% stake in IDBI Bank, while Life Insurance Corp of India holds 49.24% in the bank.

The government, in October 2022, had invited expressions of interest to sell its 30.48% stake and Life Insurance Corp of India's 30.24% stake in IDBI Bank. The government had received multiple expressions of interest from potential investors for the strategic divestment of IDBI Bank, Pandey had posted on social media platform X, formerly Twitter, in March 2023. After this, RBI started assessment of the bidders.

"Strategic sale is a long-drawn process," Pandey said. "Sometimes, due to the delay, bidders also withdraw."

The Cabinet Committee of Economic Affairs had given an in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank in May 2021. At current prices, the strategic sale of 30.48% stake in IDBI Bank could help the government garner 332.55 bln rupees. The shares of the bank today closed 4.1% up at 101.46 rupees on the National Stock Exchange.

The government has not concluded any strategic sale since the divestment of Air India Ltd in 2022. The government had called off the divestment of Bharat Petroleum Corp Ltd in 2022 after some potential buyers backed out. Pandey had cited volatility in the global energy market as the reason for scrapping the privatisation process for BPCL.

While market conditions are currently favourable, Pandey said that the government cannot exactly decide to start the process for the strategic sale of BPCL, or any other public sector company, based on market conditions. "The entire sale process spans two to three years, so by the time the government reaches close to the conclusion, the market conditions change, bidders withdraw."

In the interim as well as the full Budget for the current year, the government had given an estimate of miscellaneous receipts at 500 bln rupees that include proceeds from both divestment and asset monetisation. This is more realistic as the strategic divestment transactions are long-drawn and difficult to gauge at the beginning of the year, Pandey said.

The work on privatisation of Shipping Corp of India and BEML Ltd is still progressing and is likely to conclude soon, Pandey said without specifying a timeline. The government had invited initial bids to sell 63.75% stake in Shipping Corp and 26.00% stake in BEML in 2021.

At current prices, the government may receive 83.50 bln rupees from the sale of Shipping Corp and 48.51 bln rupees from that of BEML. The shares of Shipping Corp today closed 3.5% lower at 280.90 rupees and that of BEML closed down 2.5% at 4480.65 rupees on the National Stock Exchange. End

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.