IDBI Bank to continue as 'Indian private sector bank' post strategic sale; govt's 15% residual stake to be considered public holding

IDBI Bank will continue to operate as an 'Indian private sector bank' after its strategic sale and the government's residual 15 per cent stake in the lender post privatisation will be considered as 'public shareholding', the finance ministry said on Sunday.

An 'appropriate dispensation' for the new owner to achieve minimum public shareholding (MPS) over an extended period is under consideration and the winning bidder will have no restriction on undertaking corporate restructuring of the subsidiaries of IDBI Bank, it added.

These clarifications are part of the responses by the Department of Investment and Public Asset Management (DIPAM), under the finance ministry, to potential investors' pre-EoI queries.

The government had on October 7 invited bids for privatising IDBI Bank and said that it together with LIC will sell a total of 60.72 per cent stake in the financial institution.

The last date for putting in Expression of Interest (EoI) or preliminary bids is December 16.

The government and LIC together hold 94.72 per cent stake in IDBI Bank. The successful bidder would be required to make an open offer for acquisition of 5.28 per cent public shareholding.

Pursuant to the transaction, the government will own 15 per cent stake and LIC 19 per cent shareholding in IDBI Bank, taking their total holding to 34 per cent.

To a query on whether the government and LIC will have any board seats or participate in the management and governance of IDBI Bank after the sale, DIPAM said "the Bidders are informed that GOI (Government) has already made application for reclassification of its shareholding as 'public'. Further, the details regarding such aspects will be provided in the definitive documents (including the Share Purchase Agreement) shared with the QIPs (Qualified Interested Parties) at the RFP stage".

To another query, DIPAM said the aspects in respect of treatment of GOI's residual shareholding and the appropriate transition period for MPS compliance are under due consideration and would accordingly be communicated to the QIPs at the request for proposal (RFP) stage.

"As regards the MPS requirements, the appropriate dispensation is under consideration. Further clarification would be provided at the RFP stage," the DIPAM said to a query on whether an extended timeline will be provided for the merged entity to comply with MPS requirements.

Under the Sebi's minimum public shareholding norms, listed entities need to have at least 25 per cent public shareholding, subject to certain conditions.

On whether IDBI Bank will be reclassified as a wholly-owned subsidiary in the event that the successful bidder is a foreign bank, DIPAM said, "The Target (IDBI Bank) shall post consummation of the transaction continue to function and operate as an Indian private sector bank."

Investors also sought clarification whether corporate restructuring (including merger and demerger) is permitted for subsidiaries of IDBI Bank.

"Subject to extant RBI regulations/directions and other requirements as RBI or respective regulator may stipulate, there are no restrictions under the PIM for undertaking any corporate restructuring for the subsidiaries of IDBI Bank, post consummation of the transaction," DIPAM said.

PIM stands for preliminary information memorandum.

IDBI Bank has subsidiaries like IDBI Asset Management, IDBI Trusteeship Services and IDBI MF Trusteeship Company.

Another query pertained to whether the successful bidder would be required to seek SEBI approval for a change in control of the asset management company; and/or change in sponsor of IDBI Mutual Fund, or will the government provide a general exemption.

"The appropriate dispensation/exemption in this regard are under discussions and shall be suitably advised at the RFP stage in consultation with SEBI," it said.

The DIPAM further said IDBI Bank is presently handling Indo-Iranian trade transactions bilaterally under the Rupee Payment Mechanism (RPM) for goods of humanitarian assistance --- medicines, medical devices, agricultural commodities and food items.

"Suitable arrangements regarding the continuity of this Rupee Payment mechanism will be considered at the RFP stage," it added.

The ownership of the brands / logos / trademarks / trade names used by IDBI Bank, rights to which are owned by it presently, shall continue to vest with the lender (and its subsidiaries) post consummation of the transaction.

"It is envisaged that all intellectual property owned by IDBI Bank would be a part of the transaction on a going concern basis," it noted.

The group companies/associate companies of IDBI Bank shall be transferred on an 'as-is-where-is' basis; and the extant FDI guidelines have to be complied with by the successful bidder/IDBI Bank.

Further details in this regard would be provided to the QIPs in the VDR (virtual data room), DIPAM said.

Interested bidders would have to clear RBI's 'fit and proper' assessment and get security clearance from the government/home ministry in the EoI stage itself to be able to access IDBI Bank's data room for due diligence.

DIPAM had earlier said potential investors should have a minimum net worth of Rs 22,500 crore and must report net profit in three out of the past five years to be eligible for bidding for IDBI Bank. Also, a maximum of four members would be allowed in a consortium.

The successful bidder would be required to mandatorily lock-in at least 40 per cent of the equity capital for five years from the date of acquisition.

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