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IDBI Bank strategic sale: 7 firms in race for transaction advisor

Seven firms have been offered to manage the strategic sale IDBI Bank, including JM Financial and Ernst and Young.

According to DIPAM, these firms will make a virtual presentation to the Department of Investment and Public Asset Management on August 10.

Deloitte Touche Tohmatsu India LLP and Ernst and Young LLP have submitted bids to act as transaction advisors.

DIPAM will appoint one transaction adviser for the strategic sale IDBI Bank. The central government and LIC jointly own more than 94 per cent.

LIC currently holds a 49.24 percent stake in the bank, while the government has 45.48%. The non-promoter shareholding is 5.29 percent.

Later, the exact amount of stake dilution will be determined.

The government in June invited bids from reputed professional consulting firms / investment bankers / merchant bankers / financial institutions / banks, for facilitating/assisting DIPAM in the process of strategic disinvestment of IDBI Bank Ltd. along with transfer of management control, till completion of the transaction. The deadline for submission of bids was July 13, but it was extended to July 22.

The government would need to consult the Transaction Advisor on the modalities of disinvestment, the timing and recommend other intermediaries. They also have to help identify and select the right documents with the proper Terms of Reference.

Advisors would assist IDBI Bank in setting-up the e–data room and in the smooth conduct the due diligence process. This will position the bank to divest GoI equity.

In May, the Cabinet approved the strategic sale by the government and Life Insurance Corporation (LIC), of all stakes in IDBI Bank Ltd.

Responding to questions from IDBI Bank potential transaction advisors, DIPAM clarified last month that the LIC stake would be sold alongside the government’s. Therefore, a single transaction adviser would handle the entire process.

The amount of stake dilution will be disclosed before the RFP (Request For Proposal) stage.

In her Budget for 2021-22, Nirmala Sitharaman, Finance Minister, had stated that the privatization of IDBI Bank would be complete in the current fiscal. In the current fiscal, the government plans to raise Rs 1.75 lakh crore through privatisation and minority stake sales.

The Rs 1.75 lakh crore will be raised by the sale of government stakes in financial institutions and public sector banks. Rs 75,000 crore will come as disinvestment receipts to CPSE.

The government has disinvested Rs 7,648 crore so far in this fiscal.