These clarifications are part of the response to pre-EoI queries of potential investors by the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance.
The government had on October 7 invited bids for the privatization of IDBI Bank and said it was with LIC Will sell a total of 60.72 per cent stake in the financial institution.
The last date for Expression of Interest (EOI) or preliminary bidding is December 16. The government and LIC jointly hold 94.72 per cent stake in IDBI Bank. The successful bidder will be required to make an open offer to acquire 5.28 per cent public shareholding. As per the transaction, the government will hold 15 per cent stake in IDBI Bank and LIC will hold 19 per cent, taking their total stake to 34 per cent.
When asked 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, “Bidders are informed that the Government of India (Government) has decided to divest its shareholding has already applied for reclassification. ‘Public’. Further, details regarding such aspects will be provided in the definitive documents (including share purchase agreement) shared with QIPs (Qualified Interested Parties) at the RFP stage .
In response to another query, DIPAM said that due consideration is being given to the aspects regarding the remaining shareholding of Government of India and suitable transition period for MPS compliance and accordingly will be communicated to QIPs at Request for Proposal (RFP) stage. .
Responding to a query, DIPAM said, “With regard to MPS requirements, appropriate arrangements are under consideration. Further clarification will be provided at the RFP stage.”
Under SEBI’s minimum public shareholding norms, listed entities must have at least 25 per cent public shareholding subject to certain conditions.
When asked whether IDBI Bank would be reclassified as a wholly owned subsidiary in case the successful bidder turns out to be a foreign bank, DIPAM said, “The target (IDBI Bank) will become an Indian subsidiary after the transaction is completed.” shall continue to function and operate as a private sector bank.”
The investors also sought clarification whether corporate restructuring (including mergers and demergers) is permitted for subsidiaries of IDBI Bank.
DIPAM said, “Subject to the extant RBI regulations/directions and other requirements, as may be prescribed by the RBI or the concerned regulator, under the PIM for any corporate restructuring for subsidiaries of IDBI Bank, subsequent to the consummation of the transaction.” There’s no restriction.”
PIM stands for Preliminary Information Memorandum.
IDBI Bank has subsidiaries like IDBI Asset Management, IDBI Trusteeship Services and IDBI MF Trusteeship Company.
Another question pertained to whether the successful bidder would be required to seek SEBI’s approval for a change in control of the asset management company; And/or change in sponsor of IDBI Mutual Fund, or the Government will provide a general relaxation.
“Discussions on suitable relaxation/exemptions in this regard are underway and suitable advice will be given at the RFP stage in consultation with SEBI,” it said.
DIPAM further said that IDBI Bank is currently handling Indo-Iranian trade transactions bilaterally under the Rupee Payment Mechanism (RPM) for humanitarian aid items—medicines, medical equipment, agricultural commodities and food items.
“Suitable arrangements with regard to the continuation 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, the rights of which are presently vested with it, shall remain with the Lender (and its subsidiaries) after the termination of the Transaction.
“It is hypothesized that all intellectual Property IDBI Bank will be a part of the transaction on a company-owned basis,” it noted.
IDBI Bank’s group companies/subsidiaries will be transferred on ‘as is where is’ basis; And the extant FDI guidelines should be followed by the successful bidder/ IDBI Bank.
DIPAM said that further information in this regard will be given to the QIP in the VDR (Virtual Data Room).
The intending bidders will have to pass RBI’s ‘fit and proper’ assessment at the EOI stage itself and obtain security clearance from the Government/Ministry of Home Affairs to be able to access IDBI Bank’s data room for due diligence.
DIPAM had earlier said that potential investors should have a minimum amount of Rs. net worth 22,500 crore and to be eligible to bid for IDBI Bank should have reported a net profit in three of the last five years. Also, a maximum of four members will be allowed in a consortium.
The successful bidder shall compulsorily lock-in at least 40% of the amount equity Capital for five years from the date of acquisition.