Kickstarting privatisation process in the banking sector, the government Tuesday invited bids to appoint the transactions and legal advisors to assist in strategic sale of its equity, along with transfer of management control, in IDBI Bank to private players.
Transaction advisor — which could be consulting firms, investment or merchant bankers, and financial institutions/banks — will undertake tasks related to all aspects of proposed strategic disinvestment. It will include assisting the government on modalities of disinvestment and the timing, structuring the transaction, organizing roadshows for potential investors, and suggesting measures to fetch optimum value.
The advisor will help in negotiations with shortlisted bidders, fixing the range of fair reserve price, and support IDBI Bank in setting up of the e-data room that would help investors in conducting due diligence, according to the draft request for proposal document released by the Department of Investment and Public Asset Management (DIPAM) Tuesday.
“(The advisor will) assist GoI in fixing the range of the fair reserve price considering the valuation of IDBI Bank Limited, based on the methods employed in the financial services sector and highlighting the pros and cons of various methods and also highlighting the fact that many variations of these valuations exist. The GoI will have the option of valuation done from any other agency,” said the RFP document.
The government currently owns 45.48 per cent equity in IDBI Bank, while Life Insurance Corporation has 49.24 per cent stake and remaining 5.29 equity is held by public shareholders. Public Sector Banks cannot participate as bidders for acquisition of IDBI Bank in the transaction process, DIPAM has stated. Transactions and legal advisors have to submit their bids by July 13. With the Cabinet clearance in place and legislative provisions in line, IDBI Bank transaction is expected to be faster than the process of privatising two other banks, announced in the Budget.