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Published: Dec 15, 2022
Updated: Dec 15, 2022
The Indian government is planning to wrap up the sale of IDBI Bank by early next year. The Fairfax group of Canada, owned by Prem Watsa, is expected to make a bid for the bank. Watsa already owns Bangalore airport and has a sizeable stake in Catholic Syrian Bank, and may merge the two if its plan to acquire IDBI Bank is successful.
The Indian government has made it easier for foreign companies to buy IDBI Bank and is likely to give several waivers to the new owner. For example, in case IDBI Bank’s share price rises post the final bid, the buyer will be required to pay extra tax under an existing clause. This is where the government plans to introduce waivers. It is not unusual for the share price to increase after the government invites financial bids for the underlying company. The officials quoted in the report state that it would be ‘unfair’ to ask the new buyer of IDBI Bank to pay tax on the increase in the share price. The proposed waiver will make the divestment offer more appealing to the bidders.
Currently, the state-owned Life Insurance Corporation (LIC) and the Union government together own about 95 per cent stake in IDBI Bank. They seek to sell 60.72 per cent of IDBI Bank and had invited bids for the same back in October.
The Department of Investment and Public Asset Management (DIPAM) had earlier extended the deadline for initial bids from December 16 to January 7. According to guidelines issued by DIPAM, the potential buyers should have a minimum net worth of Rs 22,500 crore.
Further, the bidders should have reported a net profit in three out of the last five years to qualify for the bidding process. Mr Prem Vatsa is the favourite in the race so far.
Apart from Fairfax, some private equities are also expected to bid for the government and LIC-owned bank.
February 15, 2025 - First Issue
Industry Review
VOL XVI - 10
February 01-15, 2025
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