IDBI Sale Expected to Enhance Value as New Management Takes Charge
NEW DELHI: The Indian government is set to sell its stake in IDBI Bank, a move aimed at enhancing the bank’s value while ensuring the protection of employee interests. Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), confirmed that the Life Insurance Corporation (LIC) will exit the board, allowing new management to operate independently. Chawla emphasized the government’s commitment to advancing other strategic transactions in the coming months.
Chawla stated that the government has completed five strategic sales in the past five years, countering claims that it is reluctant to privatize public sector undertakings (PSUs). He noted that since 2016, the Union Cabinet has approved numerous strategic disinvestments, although some, like BPCL and Shipping Corporation, are no longer being pursued. The secretary assured that the government remains focused on reforms and is energized by the recent approval for IDBI Bank’s stake sale.
The new owners are expected to introduce private sector management practices to enhance IDBI Bank’s performance. Chawla confirmed that the service conditions of existing employees and pensioners will be fully protected, with a special pension fund established for this purpose. He mentioned that discussions with management, employee associations, and qualified parties have been ongoing for the past year to ensure a smooth transition.
Chawla also detailed the rigorous process that led to the transaction’s approval, following a setback in March when bids were rejected. The government sought professional advice to determine the bank’s fair market value, utilizing methods such as market multiples and asset valuation. The average valuation resulted in a price of Rs 75.99 per share, while the winning bid was Rs 81 per share, leading to the clearance of the Fairfax offer.
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