The Government of India (GoI) is having discussions with India’s regulatory body for securities and commodity market, the Securities and Exchange Board of India (SEBI), to loosen a crucial public shareholding norm for the prospective buyer of stake in the development finance institution, IDBI Bank Limited (NSE: IDBI), to draw in more bidders.
After many years, India invited bids early this month for a stake of 60.72 percent in IDBI Bank Limited. This finance company is currently held by the Indian Government, having a 45.48 percent stake, and the state-owned insurance group and investment company Life Insurance Corporation or LIC, has a 49.24 percent stake. According to the market regulator, every listed company, except for state-owned enterprises, must hold at least 25 percent of public shareholding within 3 years of listing.
As per a particular source, to enable the new buyer to achieve the minimum public holding requirement with no need to reduce its ownership, the Indian Government has requested the Securities and Exchange Board of India it may categorize the rest of the 34 percent or so of the company that is made up of the Government of India and Life Insurance Corporation as the public float.
Since IDBI Bank Limited’s majority shareholders are the Government of India and a quasi-public corporation, it is now free from the shareholding requirement. When the Indian Government, along with the successful bidder of IDBI Bank Limited, signs the share purchase agreement, the lowered norm would be conveyed to the buyer once it gets approved by the Securities and Exchange Board of India.
Since 2014, the Prime Minister of India, Narendra Damodardas Modi, has attempted to privatize several state-owned enterprises but has achieved very little success. The sale of IDBI Bank Limited’s majority stake to a private company would be the 1st of its kind in India’s banking industry and pave the way for other sales in the future.