According to two sources, the Indian government is in talks with the market regulator to relax a key public shareholding norm for potential buyers of IDBI Bank.
Earlier this month, India invited bids for a 60.72 per cent stake in IDBI Bank – which is 45.48 per cent owned by the government and 49.24 per cent by state-owned Life Insurance Corporation (LIC) – after years of dragging its feet. Afterwards.
The Securities and Exchange Board of India (SEBI), India’s capital markets regulator, mandates a minimum of 25 per cent of public shareholding for all listed entities, except state-owned companies, within three years of listing.
The government has asked SEBI whether it can classify the remaining stake of around 34 per cent of the government and LIC after the sale as a public float, which allows the new buyer to meet the minimum public shareholding criterion without diluting its ownership. will help. did not want to be named, told Reuters.
“If SEBI allows both the government and LIC to be classified as public shareholders, then the minimum public shareholding criteria will automatically be met,” another official said.
IDBI Bank, majority-owned by the government and a quasi-government firm, is currently exempt from shareholding norms and the promoters – LIC and the government – hold 95 per cent of the firm.
Once the government signs the share purchase agreement with the winning bidder of IDBI Bank, the criteria approved by SEBI will be shared with the buyer, said one of the officials.
India’s finance ministry did not respond to a request for comments.
Since coming to power in 2014, Prime Minister Narendra Modi has been trying to privatize several government companies. But they have had only a few successes, such as the sale of Air India, India’s flag carrier, to the Tata group’s conglomerate.
The government had first announced plans to sell IDBI Bank in 2016, but eventually reshuffled the stake to its own insurance company, LIC.
IDBI Bank’s successful majority stake to a private entity through a competitive bidding process will be the first such deal in the Indian banking sector, setting the stage for more such sales in the coming years.
In February, the government had announced the privatization of two other state-owned lenders, but the process is yet to begin.