Centre May Restart IDBI Stake Sale Process From Scratch, Shelve Current Bids

The central government is likely to invite fresh bids for the sale of IDBI Bank after initial offers fell well short of expectations, according to a report by NDTV Profit quoting souces. Two serious offers -- in the range of Rs 40,000-Rs 45,000 crore -- were below the value the government wanted for the state-run lender. 

The proposal to seek fresh bids came after senior officials met to weigh options, added the report. They are considering a fresh bidding process, though that will take more time. At present, the decision is pending as officials talk through the next steps. The senior officials are from the Department of Investment and Public Asset Management (DIPAM), the Department of Financial Services (DFS), and other concerned departments.

Currently, Life Insurance Corporation of India (LIC) has a controlling stake in the IDBI Bank at 49.24 per cent, while the Government of India (GoI) holding stands at 45.48 per cent. Meanwhile, the public float in IDBI Bank is only 5.29 per cent.

Last month, the news of trouble in the privatisation process hit the LIC-controlled bank's stock. The share price dropped sharply, falling around one-third from earlier levels. Investors have grown wary as the outlook for the sale has become uncertain.  

IDBI Bank Posts Strong March Quarter Earnings

However, in the March quarter, IDBI Bank posted solid business expansion. Its loan book grew strongly while total deposits also rose. Its total business -- the sum of deposits and loans -- rose by about 14 per cent compared with a year ago. Although low-cost deposits grew more slowly than loans, the bank kept steady momentum.  

Account holders should note that the issues are about ownership and share price, not day-to-day bank operations. The bank continues to lend and accept deposits as usual. The privatisation setback may delay changes in how the bank is run, but services to customers remain steady.