IDBI Bank Privatisation: Share Purchase Agreement Likely to be Finalised in March

The share purchase agreement for the privatisation of IDBI Bank is expected to be finalised by March 2025, as per reports. The Government of India has set a target to complete the strategic divestment of the lender within the first half of the upcoming financial year. According to sources, financial bids for the transaction are likely to be invited soon, marking a significant milestone in the bank’s privatisation process.

On March 10, reports from CNBC-TV18 indicated that the Department of Investment and Public Asset Management (DIPAM) is preparing to move forward with the next phase of the transaction. The government, along with the Life Insurance Corporation of India (LIC), intends to sell a combined 60.7 percent stake in the lender as part of the strategic divestment plan.

Following the announcement, shares of IDBI Bank saw an uptick, rising 1.87 percent to ₹74.15 on the National Stock Exchange (NSE) at 2:58 PM on Monday, reflecting positive investor sentiment regarding the progress of the divestment process.

Privatisation Process Enters Advanced Stage

The divestment of IDBI Bank has moved into the due diligence phase, with global consultancy firm KPMG conducting a closing review of the bank’s financials and operations. Once this report is finalised, it will be presented to IDBI Bank’s board before being shared with potential bidders.

The government had earlier announced its intention to divest its stake in IDBI Bank in a phased manner. DIPAM is overseeing the process, which is expected to culminate in the transfer of ownership to a strategic buyer. According to reports, financial bids will not be placed in March, and the final transaction is now expected to take place in the 2025-26 fiscal year.

Background on IDBI Bank’s Divestment

The government, in collaboration with LIC, had initiated the privatisation process of IDBI Bank in 2022 by inviting expressions of interest (EoIs) from prospective buyers. The move is part of a broader strategy to reduce public sector participation in the banking industry and attract private investment to enhance the bank’s operational efficiency.

In January 2023, DIPAM received multiple expressions of interest from domestic and international investors. Since then, the shortlisted bidders have undergone extensive due diligence to assess IDBI Bank’s financials, risk exposure, and growth potential. The final stage of the bidding process will commence once the share purchase agreement is formalised.

Stake Sale and Strategic Buyer Criteria

The government and LIC currently hold a combined stake of approximately 94.7 percent in IDBI Bank. As per the proposed sale structure:

• The central government will divest a 30.48 percent stake in the bank.
• LIC will offload 30.24 percent of its holding, reducing its ownership to a minority stake.
• The remaining shares will continue to be held by retail and institutional investors.

Potential buyers are required to meet stringent eligibility criteria, including regulatory approvals from the Reserve Bank of India (RBI). Additionally, the strategic investor must demonstrate financial stability, operational expertise in banking or financial services, and a clear plan for IDBI Bank’s growth post-acquisition.

Investor Sentiment and Market Reaction

The upcoming privatisation of IDBI Bank is being closely monitored by market participants. The bank’s stock has witnessed increased activity in recent months, with investors anticipating value unlocking post-divestment.

Market analysts believe that the strategic sale could lead to improved operational efficiency, better capital allocation, and enhanced governance for IDBI Bank under private ownership. However, regulatory clearances, investor interest, and macroeconomic conditions will play a critical role in determining the final outcome of the transaction.

With IDBI Bank’s strategic divestment moving into the final stages, all eyes are on DIPAM’s next steps. The successful completion of this transaction will mark a significant milestone in India’s banking sector reforms and set a precedent for future privatisations of public sector enterprises.