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Roadshows for IDBI Bank disinvestment ongoing, says Finance Ministry – Moneycontrol

Roadshows for IDBI Bank disinvestment ongoing, says Finance Ministry

Nearly a year after the Cabinet gave its in-principle approval for the strategic disinvestment and transfer of control of IDBI Bank, the government has finally started conducting roadshows to gauge investor interest in the lender.

March 21, 2022 / 03:34 PM IST

IDBI Bank is an associate company of LIC.

The government is in the midst of roadshows “to assess the investors’ interest before the Expression of Interest” for the strategic disinvestment of IDBI Bank, Minister of State for Finance Bhagwat Kishanrao Karad said in response to a question in Lok Sabha on March 21.

The strategic disinvestment of the government and Life Insurance Corp of India’s (LIC) stakes in IDBI Bank was approved by the Cabinet Committee on Economic Affairs on May 5, 2021.

While the government has a 45.48 percent stake in IDBI Bank, LIC owns 49.24 percent of the lender. The extent to which the two stakes will be divested will be decided “at the time of structuring of transaction in consultation with RBI”, the government had said last year.

The roadshows for IDBI Bank’s disinvestment comes amid delays for LIC’s own initial public offering. The insurance giant filed its draft red herring prospectus over a month ago. However, financial markets have been in turmoil ever since Russia invaded Ukraine in late February, leading to speculation that the listing may be delayed. Reports have emerged that the IPO could be pushed to FY23.

IDBI Bank is an associate company of LIC. In its IPO papers filed with the Securities and Exchange Board of India, LIC had said that while IDBI Bank “does not need to raise further capital at the moment, we may be required to infuse additional funds into IDBI Bank in the future”.

“However, if IDBI Bank requires additional capital prior to the expiry of the applicable five-year period and it is unable to raise capital, we would be required to infuse additional funds into IDBI Bank, which may have an adverse effect on our financial condition and results of operations,” the prospectus had added.

Regulations also require that only one associate company of LIC can be engaged in housing finance activity. This means one of IDBI Bank and LIC Housing Finance Limited would have to get out of home financing by November 2, 2023, should IDBI Bank remain the insurance behemoth’s associate company even then.

“The impact of complying with this requirement of the RBI may have an adverse effect on our financial condition, results of operations and cash flows,” LIC had further cautioned in its prospectus.

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