NEW DELHI: With RBI giving its “fit and proper” report on bidders for IDBI Bank, all eyes are now on govt and the Budget as the market awaits for a signal on disinvestment.
IDBI Bank has been up for privatisation for several years, and govt had been awaiting an RBI’s assessment on bidders meeting the “fit and proper” norms — or are compliant with regulations and are not under the scanner of other regulators — to move to the next stage of the process.
RBI has given its report on all but one bidder, a foreign player, which did not share information and the overseas regulator too has not provided data. Govt holds 45.5% in the erstwhile development financial institution that became a bank, with LIC being the largest shareholder with over 49% stake.
The plan envisages the sale of 60.7% in the bank, including govt’s 30.5% and LIC’s 30.2%. Based on the current market cap of almost Rs 95,000 crore, the Centre can hope to realise almost Rs 29,000 crore from the disinvestment, although several observers have said that the terms of the transaction are not very attractive.
While the Modi govt had lined up an ambitious privatisation agenda, including public sector companies such as BPCL, Concor, BEML, Shipping Corporation, IDBI Bank, state-run lenders and an insurance company, it has failed to report any progress with a virtual freeze on the exercise for the last 18 months as the general elections were due.
While there were expectations that things will move post-polls, but the verdict has put a question mark over the fate of disinvestment, especially with petroleum minister Hardeep Puri recently stating that BPCL privatisation has been shelved.
Modi govt stance on privatisation is eagerly awaited, given that this time it is dependent on coalition partners and the Budget is likely to provide cues.
Given the recent rise in PSU stocks, the govt can hope to meet its disinvestment target of Rs 50,000 crore during the current financial year.
While the govt has repeatedly spoken about getting out of sectors that are “non-strategic”, in the last 10 years, it only has the Air India disinvestment to count as a success.
Market observers see IDBI Bank as an easier entity to divest, given that it is a private lender for all practical purposes with govt stake rising due to massive capital infusion to help the bank deal with bad debt-driven losses.
