The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
India is pushing for a valuation of around 640 billion rupees ($7.7 billion) for state-owned IDBI Bank Ltd. in what could be the biggest sale of the government’s stake in a lender in decades, according to a person familiar with the matter.
The government earlier this month invited bidders for a 60.72% stake in the Mumbai-listed lender. The valuation target means the administration is seeking a premium of roughly 33%, based on IDBI Bank’s market value of about $5.8 billion.
IDBI Bank’s improved profitability could support the valuation target, said the person, who asked not to be identified as the information is confidential. Potential investors ranging from domestic and foreign banks to non-banking financial companies and private equity funds have expressed initial interest in the asset, the person added.
Bidders could get regulatory approvals and security clearances after November as the process proceeds, according to the person. A sale of the majority stake could be completed as soon as in the next fiscal year starting from April 1, the person said. The federal government and the state-owned Life Insurance Corp. of India together own about 95% in IDBI Bank.
The IDBI Bank stake sale is a test case for Prime Minister Narendra Modi, who has committed to divest from most large businesses India owns, and use the funds to bolster public finances. After years of trying, the government has only been able to privatise national carrier Air India Ltd. and introduce outside backers to LIC, while its plans to sell refiner Bharat Petroleum Corp Ltd. hit a wall as bidders struggled to find partners.
The government has been slow in raising funds from disinvestment this year. The annual budget earmarked 650 billion rupees from asset sales for the current fiscal year, but it has raised just over a third of the target, primarily from  the $2.7 billion initial public offering of LIC in May.
Just four years ago, IDBI Bank had the highest bad-loan ratio among banks in the nation. Rakesh Sharma, the lender’s chief executive officer, came out of retirement in 2018 to helm a revamp. About 195 billion rupees of bad debt could be recouped, Sharma said in an interview in August. The bank reported a 25% jump in net income from a year ago for the three months ended June.
—Bloomberg