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Govt to get moving on IDBI Bank sale after LIC IPO

By Nikunj Ohri and Arup Roychoudhury
January 22, 2022 11:19 IST
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The department of investment and public asset management is racing against time to launch the LIC IPO, which could become the largest-ever listing on the Indian bourses. This would lead to some delay in the strategic divestment of IDBI Bank.

Photograph: PTI Photo.

The government will start reaching out to potential investors and begin road shows for the delayed strategic sale of IDBI Bank after it launches the initial public offering of Life Insurance Corporation of India, officials in the know said.

The Centre, learning from its experience from Air India’s divestment, will structure the sale of the lender after taking investors’ feedback, they added.

 

The task of debuting India’s largest insurer on the stock exchanges, which involved making a lot of legislative and compliance changes, has completely occupied officials to ensure its grand success.

The department of investment and public asset management is racing against time to launch the LIC IPO, which could become the largest-ever listing on the Indian bourses.

This would lead to some delay in the strategic divestment of IDBI Bank.

“We had planned to float the preliminary information memorandum of IDBI Bank in December, but the deliberations on structuring the deal with the Reserve Bank of India have taken some time,” a top official told Business Standard. The sale would require clarity on the incoming buyer being allowed to hold a majority shareholding in the lender, and allowing bids through a consortium, among others.

Road shows will be organised after the LIC IPO, targeted for launch in March, the official said. Road shows were planned sooner, but the third wave of the pandemic derailed the programme.

It’s not just IDBI Bank. With LIC’s listing just round the corner, other divestment and proposals have taken a back seat. A second official said that taking LIC public before March 31, 2022, is the top priority for the government to ensure that the Centre comes as close to the FY22 budgeted target of Rs 1.75 trillion as possible.

As reported earlier, the planned big-ticket privatisation of Bharat Petroleum may spill over to the next financial year as many bidders have not been able to find partners to form a consortium to finance the deal. This is due in part to the fact that there continues to be considerable global macroeconomic uncertainty over the Covid-19 pandemic. Besides, there is volatility in the energy markets.

Moreover, due diligence for the sale of BPCL has taken longer than anticipated. Interested bidders had got access to the refiner’s financial data in April, but have seen delays in completing due diligence on account of disruptions owing to the pandemic.

With manpower and resources focussed on the LIC IPO, the work on privatising other state-owned candidates has slowed down. These include Shipping Corporation of India, Container Corp (Concor), Central Electronics Ltd, Pawan Hans, and Nilachal Ispat Nigam Ltd.

Of these, NINL and Pawan Hans may be the only other candidates whose sale could be carried out before the fiscal year is over. The proceeds from these are not expected to be substantial when compared to the overall target.

According to sources, the privatisation of Shipping Corp is seeing delays as not all of its ships are currently berthed in Indian docks, leading to deferral in valuation. Moreover, the outlook for global shipping markets remains weak due to the pandemic and container shortages.

The privatisation of Central Electronics has been disrupted due to protests by employee unions, bringing the approval of successful bidders back on the inter-ministerial group’s table. The PIM for Concor has not yet been issued as there were delays regarding the Indian Railways’ land leasing policy. Concor’s yards are on railways land and hence a policy for leasing out that land is considered crucial before the PSU is sold to a private player.

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Nikunj Ohri and Arup Roychoudhury in New Delhi
Source: source
 

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