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Tag: IDBI BANK

  • IDBI Bank gets Rs 2.97 crore GST demand order

    IDBI Bank gets Rs 2.97 crore GST demand order

    IDBI Bankon Tuesday said it has received a GST demand order of ₹2.97 crore along with interest and penalty for alleged excess availment of input tax credit (ITC).

    In a regulatory filing, the private sector bank said the Dehradoon state tax department has issued an order under the GST rules pertaining to 2018-19 fiscal for alleged excess availment and utilisation of ITC.

    The order includes a tax demand of ₹1.42 crore as well as interest and penalty of ₹1.41 crore and ₹0.14 crore, respectively.

    “The bank is evaluating appropriate legal remedy, including appeal, as per law,” IDBI Bank said.

    Shares of IDBI Bank were trading at ₹85.41, down 3.82 per cent over previous close on the BSE.

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  • Fairfax sweetens the deal for IDBI Bank

    Fairfax sweetens the deal for IDBI Bank

    Canadian billionaire Prem Watsa’s Fairfax is back in the fray bidding for IDBI Bank with a sweetened deal.

    According to highly placed sources aware of the matter Fairfax seems to have agreed for an all-cash compensation structure to acquire IDBI Bank. In addition, Watsa is said to have committed to ensure that the identity of IDBI Bank will be preserved after divestment.

    The revised offer from Fairfax is believed to have been communicated to the government officials about two weeks ago.

    Thorns removed

    “Until now, the bidders including Fairfax were hesitant to offer cash compensation and that was a contentious issue because the government usually doesn’t entertain share swap structures. If this is taken care of, the deal may tilt in favour of Fairfax,” said a senior executive aware of the matter. The improved offer comes amidst political tension between India and Canada and the sweetener extended by Fairfax could once again make it a top contender for IDBI Bank.

    Revised terms

    According to the revised offer, Fairfax India Holding, the Indian entity of the PE major, would bid for IDBI Bank. Since Fairfax is also the promoter of CSB Bank, the former may be merged into IDBI Bank once the deal is sealed, because Indian banking regulations mandate that an investor cannot be a promoter of two banks at the same time. With the market cap of IDBI Bank at ₹90,438 crore multiple times higher than CSB Bank’s ₹5,980 crore market capitalisation, sources say the revised structure would be beneficial for IDBI Bank.

    This is a departure from the earlier proposals where Fairfax intended to hold IDBI Bank as a separate entity for a few years post the acquisition and subsequently merge it with CSB Bank. “The Reserve Bank is not keen to allow parallel structures for a common promoter and with IDBI Bank being a very established entity, the government wasn’t not comfortable with the bank losing its identity,” said another senior executive aware of the transaction. Bid from Fairfax India Holding would effectively address concerns raised by the RBI and the government.

    With IDBI Bank’s stock price zooming from ₹60 a share when divestment talks were initiated to now over ₹84 a piece, it would be interesting to see if Kotak Mahindra Bank which is also reportedly in fray for IDBI Bank would be willing to match or better Watsa’s offer.

    Divestment of IDBI Bank started in October 2022 with Life Insurance Corporation of India (LIC) and the government selling 30.24 per cent stake 30.48 per cent stake respectively in the bank. Email sent to Fairfax and the finance ministry remained unanswered till press time.

    Tough to turn down?

    Prem Watsa willing offer cash compensation for IDBI Bank

    Sources say Fairfax has promised to retain IDBI Bank’s identity after divestment

    Revised deal terms said to have been communicated to finance ministry

    Divestment of IDBI Bank commenced in Oct 2022

    LIC and government to sell 30.24 per cent and 30.48 per cent stake respectively in IDBI Bank

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  • Kotak vs Watsa: The battle for acquiring IDBI Bank intensifies

    Kotak vs Watsa: The battle for acquiring IDBI Bank intensifies

    It’s a two-horse race for IDBI Bank between Kotak Mahindra Bank and Prem Watsa-led Fairfax India Holdings, with both parties willing to pay a premium for acquiring a controlling stake. However, neither wants to merge IDBI Bank with their respective banks at this juncture.

    “A reasonable share of the government holding may remain in IDBI Bank for at least 2-3 years post the sale,” said a source explaining why the two bidders want to retain their existing banking entities independent of IDBI Bank.

    That said, highly placed sources say both interested investors are willing to shell out the premium expected by the government to acquire a majority stake in the bank.

    At around ₹57,000 crore of market capitalisation, IDBI Bank trades at approximately 1.3x 12-months trailing price to book valuation.

    On June 5, 2022 businessline had reported on Prem Watsa evincing interest in IDBI Bank, while on February 5 this year, we reported about Kotak’s interest in the bank. Sumitomo Mitsui Financial Group and Emirates NBD are said to be the other bidders.

    Seeking exemptions

    Kotak has proposed a structure whereby IDBI Bank would be held as its associate, with none of Kotak’s key management executives playing any role in the former.

    “The boards of IDBI Bank and Kotak Bank will not have overlaps,” said a person familiar with the matter. Once the government’s stake in IDBI Bank reduces, it may be merged with Kotak Bank. “A glide path of 3-5 years has been sought for the merger,” said the source.

    Fairfax has approached the RBI to not consider it as a promoter of IDBI Bank. “Fairfax wants to be seen as a large investor in the bank because it doesn’t want to cede control in CSB Bank or merge the two banks in the near term,” said another senior executive who didn’t want to be identified.

    As a deal sweetener, sources said: “Fairfax may extend comfort to the Government of India and Life Insurance Corporation of India (LIC) that IDBI Bank will remain a bancassurance partner for all the existing lines of businesses it has with these entities.”

    Emails sent to Kotak Mahindra Bank and Fairfax remained unanswered till press time.

    Tough call

    The exemptions sought by Kotak and Fairfax are contrary to the current regulations. The extant ownership norms do not permit an investor to hold two banks in the capacity of a promoter.

    Fairfax is the promoter of CSB Bank holding a 49.72 per cent stake. Likewise, a bank cannot invest in another bank, though an exception was made in March 2020 when the State Bank of India invested a 49 per cent stake in YES Bank.

    Tracking the divestment
    • DIPAM opened an expression of interest in IDBI Bank on October 7, 2022.
    • On January 7, 2023, it announced that it received multiple interest.
    • Presently, LIC and government hold 49.24 per cent and 45.48 per cent stake in the bank.
    • Post the sale LIC to hold 19.24 per cent and government at 15.48 per cent.
    • Data room for due diligence likely to be opened in June.
    • DIPAM may call for financial bids by September.

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  • IDBI Sale likely to conclude at 7-10 per cent premium

    IDBI Sale likely to conclude at 7-10 per cent premium

    As the IDBI Bank privatisation enters the next stage, it may end up being one of the most profitable divestment processes for the government in recent years. Interested bidders are willing to offer a 7-10 per cent premium for controlling interest in the bank, which works out to a valuation of ₹64,000-66,000 crore.

    Highly placed sources say that with the market regulator, SEBI, allowing the government’s request to classify its shares as “public holdings” post divestment, it has increased the willingness of investors to pay top dollars to take the promoter’s seat at the bank. “A major roadblock with respect to valuations and the deal has been cleared,” said a person aware of the matter.

    It is learnt from multiple sources that nearly 4–5 large investors, a motley of banks and private equity players, have submitted their expressions of interest (EOI) to the Department of Investment and Public Asset Management (DIPAM) to collectively pick up a 60.72 per cent stake in IDBI Bank.

    These include consortiums led by Fairfax Financial Holdings, Middle East-based Emirates NBD, and Japan’s Sumitomo Mitsui Banking Group. The interested investors are likely to submit their final bid by March, after which the reserve price for the transaction will be fixed.

    Effect of roadshows

    “When DIPAM conducted roadshows in April last year, it was looking at closing the deal at just about the then-prevailing market price, which was around ₹40–45 a share,” said a person aware of the matter.

    “The bank’s stock has appreciated by over 20 per cent since the road shows. With the commitment coming from the government that it will not take a seat on the board once the new investors step in, exercise control over the affairs of IDBI Bank, and have no special rights with respect to the bank, some of the interested investors are willing to pay the controlling premium for the deal,” he added.

    “For a bank with a balance sheet size of over ₹3-lakh crore and 1,900 branches, it makes sense to pay this kind of premium. It would give a head start to the business,” said a person aware of the transaction.

    On January 5, IDBI Bank informed stock exchanges that SEBI has relaxed some of the norms with respect to the government’s shareholding in the bank post the divestment, and on January 7 (the last day for furnishing EOIs), Tuhin Kanta Pandey, secretary, DIPAM, announced on Twitter that multiple EOIs have been received for the strategic disinvestment of government and Life Insurance Corporation of India stakes in IDBI Bank.

    The government holds a 45.48 per cent stake in the bank, and LIC’s stake is 49.24 per cent. Post divestment, LIC’s stake will reduce to 19 per cent, while the government’s will fall to 15 per cent.

    Hamsini Karthik

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  • Govt gets multiple bids for stake sale in IDBI Bank

    Govt gets multiple bids for stake sale in IDBI Bank

    The Centre on Saturday said that it has received multiple bids for stake sale in IDBI Bank. Government along with Life Insurance Corporation of India (LIC) together plan over 60 per cent stake sale in the bank along with management control as part of strategic disinvestment.

    The government and LIC’s current shareholding in IDBI Bank are at 45.48 per cent and 49.24 per cent, respectively.

    “Multiple Expressions of Interest received for the Strategic Disinvestment of Govt and LIC Stake in IDBI Bank. The transaction will now move to the second stage,” Tuhin Kanta Pandey, Secretary in the Department of Investment and Public Asset Management (DIPAM) said in a tweet. However, he did not disclose the name of bidders.

    Now, based on the Expression of Interests (EoI), bidders will be shortlisted and will be asked to submit financial bids, following which final buyers will be selected. The process is expected to completed in the next fiscal.

    Reclassification

    Earlier this week, in an effort to push the sale, the market regulator, Securities and Exchange Board of India (SEBI) agreed to the government’s request for re-classification of its holding in the bank as “public” post the disinvestment, subject to conditions. The market regulator has relaxed the requirements specified in its Listing Obligations and Disclosure Requirements (LODR) regulations relating to reclassification of promoter/ promoter group entities following an application made by the government through the Department of Investment and Public Asset Management (DIPAM).

    While giving relaxation from the aforementioned regulation, SEBI said two conditions need to be fulfilled: the voting rights of the government shall not exceed 15 per cent of the total voting rights of the bank; and the intention of the government to get its shareholding re-classified as public holding shall be specified in the letter of offer dispatched to the bank’s shareholders in connection with the open offer made by the new acquirer. The re-classification as public shareholder could reassure potential global investors that the government and LIC as promoter/promoter group may take a hands-off approach after the disinvestment.

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    The finance ministry mulls relaxing tax clause, as the buyer of IDBI Bank may have to pay additional tax if the share price rises post the final bid

    After completion of the strategic disinvestment, IDBI Bank has to make an application to the stock exchanges for re-classification of government holding under public category, SEBI said. Further, the new acquirer has to ensure compliance with minimum public shareholding requirements within one year from the completion of open offer.

    The relaxation in LODR regulations comes in the wake of government requesting SEBI to treat the residual holding of the government in IDBI Bank as a pure financial investment and accordingly re-classify it as “public”. This is subject to conditions that the government, post-disinvestment does not exercise control over the affairs of the bank, does not have any special rights with respect to the bank, and is not represented on its Board of Directors nor act as key managerial personnel.

    Shishir Sinha

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  • SEBI allows govt to re-classify its IDBI Bank stake as ‘public’ for ease of divestment

    SEBI allows govt to re-classify its IDBI Bank stake as ‘public’ for ease of divestment

    In a move that could give a fillip to the proposed strategic disinvestment of government and LIC’s stake in IDBI Bank, SEBI has acquiesced to the government’s request for re-classification of its holding in the bank as “public” post the disinvestment, subject to conditions.

    The market regulator has relaxed the requirements specified in its Listing Obligations and Disclosure Requirements (LODR) regulations relating to reclassification of promoter/ promoter group entities following an application made by the government through the Department of Investment and Public Asset Management (DIPAM).

    According to Regulation 31A(3)(b)(I) of LODR regulations: “Reclassification of status of a promoter/ person belonging to promoter group to public shall be permitted by the stock exchanges only upon satisfaction of the following conditions…

    “…the promoter(s) seeking reclassification and persons related to the promoter(s) seeking reclassification shall not: together, hold more than 10 per cent of the total voting rights in the listed entity…”

    Two conditions

    While giving relaxation from the aforementioned regulation, SEBI said two conditions need to be fulfilled: the voting rights of the government shall not exceed 15 per cent of the total voting rights of the bank; and the intention of the government to get its shareholding re-classified as public holding shall be specified in the letter of offer dispatched to the shareholders of the bank in connection with the open offer made by the new acquirer.

    The re-classification as public shareholder could reassure potential global investors that the government and LIC as promoter/promoter group may take a hands-off approach after the disinvestment.

    The government and LIC’s current shareholding in IDBI Bank are at 45.48 per cent and 49.24 per cent, respectively.

    After completion of the strategic disinvestment, IDBI Bank has to make an application to the stock exchanges for re-classification of government holding under public category, SEBI said.

    Further, the new acquirer has to ensure compliance with minimum public shareholding requirements within a period of one year from completion of open offer.

    The relaxation in LODR regulations comes in the wake of government requesting SEBI to treat the residual holding of the government in IDBI Bank as a pure financial investment and accordingly re-classify it as “public”.

    This is subject to conditions that the government, post-disinvestment does not exercise control over the affairs of the bank, does not have any special rights with respect to the bank, and is not represented on its Board of Directors nor act as key managerial personnel.

    BL Mumbai Bureau

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