IDBI Bank Up 5% As SEBI Allows Govt Holding to be Reclassified as Public Post Divestment

IDBI Bank shares were up 5 per cent at Rs 57.25 on the BSE in Friday’s intra-day trades in an otherwise subdued market after SEBI allowed the Central Government to classify its stake as “public” after its stake sale on condition that its voting rights do not exceed 15 per cent, of the total voting rights of the bank, the lender said in a regulatory filing on Thursday.

At present, the government and state-owned Life Insurance Corporation hold a little over 94 per cent in IDBI Bank and are classified as its co-promoters. While the government holds 45.48 per cent stake, LIC holds around 49.24 per cent, and the remaining 5.28 per cent is public shareholding.

Also, the government must specify its intention to reclassify its shareholding in the bank as “public holding” in the letter of offer dispatched to the shareholders of the bank in connection with the open offer made by the acquirer.

Further, after disinvestment, the bank must make an application to the stock exchanges for reclassification of the government holding under the public category. And, the new acquirer must ensure compliance with the minimum public shareholding (MPS) requirements within one year of the sale.

The central government is looking to sell nearly 61 per cent stake in IDBI Bank. The last date for submitting expressions of interest for IDBI Bank is Saturday. Once the government receives initial bids expressing interest from buyers, the Reserve Bank of India (RBI) would vet them to see if they meet the central bank’s “fit and proper” criteria.

The government had earlier allowed foreign funds and investment vehicles incorporated outside India to own over 51 per cent of IDBI Bank. The Centre has also stated that it may consider relaxing the five-year lock-in period for shares if a non-banking financial company or NBFC is merged into IDBI Bank.

Further, norms that apply to public sector banks will not apply to IDBI Bank after the government and LIC sell their stakes, even though they together will continue to hold about 33 per cent in the bank.

The government has also said that IDBI Bank will operate as a private sector bank even if it were to be taken over by a foreign bank.

The Department of Investment and Public Asset Management (DIPAM) last month extended the deadline to submit Expressions of Interest (EoI) for the strategic disinvestment of the Bank to January 7 2023 from December 16 2022.

The last date for submitting physical copies of EoI by interested bidders who have done so electronically was extended from December 23 to January 14.

In past three months, the stock price of IDBI Bank has rallied nearly 35 per cent, as compared to 4 per cent rise in the S&P BSE Sensex. In past six months, it has zoomed 85 per cent, as against 14 per cent gain in the benchmark index.

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