Tag: CCEA

CCEA clears LIC IPO; may hit market in Q4 of FY22

Banking & Finance

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The Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC) moved one more step with the Cabinet Committee of Economic Affairs (CCEA) green-lighting it.

“The CCEA has given in-principle approval,” a senior government official told BusinessLIne. Although the IPO timeline is not set, it is expected to hit the market in the fourth quarter of 2020-21. Also, there is no clarity on the size of IPO, but experts expect this to be the largest ever in India. The Centre has already notified all amendments to the LIC Act, 1956 to facilitate the IPO.

Earlier this month, in an interview to BusinessLine, Finance Minister Nirmala Sitharaman had said the LIC IPO “is on course”. However, she refused to give a timeline fearing it will lead to speculation.

FM blows the privatisation bugle

The CCEA nod is the second big move for the LIC IPO. On June 19, based on decisions by SEBI, the Finance Ministry notified relaxed norms for large companies planning to enter the stock market.

LIC IPO: Government likely to invite bids from merchant bankers this month

The IPO of LIC is critical as the Government needs resources to meet its steeply stepped up spending to tackle the Covid-19 pandemic. The Centre has set a target of mopping up ₹1.75-lakh crore through disinvestment, with ₹1-lakh crore expected from sale of stake in public sector banks and financial institutions. As on date, ₹7,645.7 crore has been collected.

LIC’s auditor appointment made a board process, ahead of IPO

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IDBI Bank sale: Deadline for transaction, legal advisors’ bids extended till July 22

Banking & Finance

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The Government has extended the deadline for transaction and legal advisors to bid for managing the IDBI Bank strategic sale by nine days till July 22.

The Department of Investment and Public Asset Management (DIPAM) had on June 22 invited bids from merchant bankers and law firms for managing and giving legal advice for the sale process. The last date to put in bids was July 13.

“The competent authority has decided to extend the bid submission date of the tender by nine days. The last date of bid submission will now be July 22, 2021,” the DIPAM said in a notice.

DIPAM, which manages government’s equity, had also clarified to the merchant bankers that LIC’s holding in IDBI Bank would be sold along with government’s stake, but the exact quantum of stake dilution would be decided later.

The Central Government and LIC together own more than 94 per cent equity of IDBI Bank.

LIC, currently having management control, has a 49.24 per cent stake, while the government holds 45.48 per cent in the bank. Non-promoter shareholding stands at 5.29 per cent.

The cabinet in May had approved the strategic sale of the entire stake of government and Life Insurance Corporation (LIC) in IDBI Bank.

In response to queries received from potential transaction advisors in IDBI Bank, DIPAM has clarified that since LIC’s stake would be sold along with that of the government’s, a single transaction advisor would manage the entire share sale process.

“The mandate received from CCEA is to offload up to 100 per cent stake of GoI and LIC along with transfer of management control. However, the exact quantum is yet to be worked out. It will be determined, as we go through the transaction and ascertain investors’ interest and market appetite.

“It is clarified that LIC’s stake will be sold along with GoI’s shareholding in this transaction. So there is only one transaction advisor,” it said.

The quantum of stake dilution would be declared before RFP (Request for Proposal) stage of the transaction, it added.

Finance Minister Nirmala Sitharaman in her Budget for 2021-22 had said the process of privatisation of IDBI Bank would be completed in the current fiscal. The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions. Rs 75,000 crore would come as CPSE disinvestment receipts.

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IDBI Bank: Divestment, transfer of management control approved

Banking & Finance

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The Cabinet Committee on Economic Affairs (CCEA) on Wednesday gave its in-principle approval for strategic disinvestment along with the transfer of the management control in the IDBI Bank Ltd.

“The extent of respective shareholding to be divested by the Central government and the LIC would be decided at the time of structuring of transaction in consultation with the RBI,” an official release said.

‘Perfect timing’

The Central government and Life Insurance Corporation (LIC) together own more than 94 per cent of equity of the IDBI bank. While the Central government owns 45.48 per cent stake, the shareholding of LIC in the IDBI Bank is 49.24 per cent. LIC is currently the promoter of the IDBI bank with management control, while the Central government is the co-promoter.

Capital market observers noted that the timing of the CCEA decision was quite perfect with the IDBI bank now coming into black after a gap of five years. For the financial year ended March 31, 2021, IDBI Bank has reported a full year standalone net profit of ₹1,359 crore against net loss of ₹12,887 crore in the previous year. The bank had also come out of the RBI’s Prompt Corrective Action (PCA) framework on March 10. “This could boost the valuation of the lender when the government goes in for the strategic disinvestment,” they said.

Speaking to BusinessLine soon after the announcement of the CCEA decision, Rakesh Sharma, Managing Director & CEO, IDBI Bank said, “The bank has seen a turnaround and balance sheet has improved. It is for the owners – the government and the LIC – to decide on the quantum of stake sale, timing and price etc. Now that bank has turned around, it may help them in attracting investors at right valuation.”

It is still not clear whether the management control and majority equity holding will pass on to a foreign bank or any domestic acquirer. One thing is for sure is that the LIC would tag along with the Central government, which is looking to exit, when the transaction is put through – so that the valuation is maximised for both the selling shareholders.

“It is expected that the strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of the IDBI bank,” the release added.

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CCEA clears strategic disinvestment of IDBI Bank, BFSI News, ET BFSI

Banking & Finance

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The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi, has given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd. The extent of respective shareholdings to be divested by the Government of India and the Life Insurance Corporation of India (LIC) will be determined at the time of structuring of transaction consultation with RBI.

Government of India (GoI) and LIC together own more than 94% of equity of IDBI Bank (GoI 45.48%, LIC 49.24%). LIC is currently the promoter of IDBI Bank with Management Control and GoI is the co-promoter

The LIC Board of Directors have passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank Ltd by divesting its stake in conjunction with a strategic stake sale proposed by the government, with the goal of relinquishing management control and considering price, market outlook, statutory requirements, and policyholder interests.

It is expected that strategic buyer will infuse capital, new technologies, and best management practises for the optimal development business potential and growth of IDBI Bank Ltd.’s and will generate more business without relying on LIC or government assistance/funds.



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IDBI Bank: CCEA approves strategic disinvestment and transfer of management control

Banking & Finance

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The Cabinet Committee on Economic Affairs (CCEA) on Wednesday gave its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank.

 

The extent of respective shareholding to be divested by Central government and LIC would be decided at the time of structuring of the transaction in consultation with the RBI, an official release said.

IDBI Bank’s ownership

The Central government and LIC together own more than 94 per cent of equity in IDBI Bank. While the government owns 45.48 per cent stake, the shareholding of LIC in IDBI Bank stands at 49.24 per cent.

LIC is currently the promoter of IDBI bank with management control while the Central government is the co-promoter.

LIC’s Board has passed a resolution to the effect that the insurer may reduce shareholding in IDBI Bank through divesting its stake along with strategic stake sale as envisaged by the government with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulations and interest of policyholders.

The decision of LIC‘s Board is also consistent with the regulatory mandate to reduce its stake in the bank. It is expected that the strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank and shall generate more business without any dependence on LIC and government assistance/funds, the release added.

Resources through strategic disinvestment of government equity from the transaction would be used to finance developmental programmes of the government benefiting the citizens, the release added.

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