Shares of IDBI Bank rose sharply during Friday’s trading session after an important announcement related to its disinvestment. Here is all you need to know.
New Delhi ,UPDATED: Jan 6, 2023 12:15 IST
Shares of IDBI Bank has jumped over 8% after a sharp rally. (Photo: Representational image)
By India Today Web Desk: Shares of IDBI Bank rallied shapely on Friday even as increased market volatility dented the momentum of benchmark equity indices.
At around 12:00 pm, IDBI Bank shares were trading over 8 per cent per cent higher after getting a nod from capital markets regulator Securities and Exchange Board of India (Sebi) to reclassify the central government’s holding in the bank as ‘public’ after sale.
IDBI Bank informed stock exchanges about the development, but it will be subject to the condition that the central government’s voting rights in the bank will not exceed 15 per cent of the total voting rights after the sale.
Additionally, the government has to specify its intention to reclassify its shareholding in the bank as ‘public holding’ in the letter of offer that will be sent to shareholders of IDBI Bank in connection with the open offer made by the acquirer.
Furthermore, IDBI Bank has to submit an application to the bourses for reclassification of the government holding under ‘public’ category after the disinvestment process. The new acquirer also has to comply with the minimum public shareholding requirements within one year of the sale.
At present, the government and state-owned Life Insurance Corporation (LIC) hold just over 94 per cent stake in IDBI Bank and are classified as co-promoters. Of the 94 per cent stake, the government holds around 45 per cent and LIC holds a little over 49 per cent. The remaining stake of roughly over 5 per cent is classified as public shareholding.
It may be noted that the central government is planning to sell roughly 61 per cent stake in IDBI Bank. The government is planning to sell , while LIC is also and interested parties have to submit their preliminary bid by Saturday. A successful bidder is required to float an open offer to acquire 5.28 per cent from public shareholders.
Of the 61 per cent, the government is planning to sell just over 30 per cent, while LIC will also offload a similar percentage. Following the sale, the central government will be left with 15 per cent, while LIC will be left with a little over 19 per cent stake in IDBI Bank.
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The government had earlier requested a reclassification of its remaining stake in IDBI Bank after the disinvestment as ‘public holding’ as it would give up management control and be an ordinary shareholder to remain compliant with corporate governance norms.
The approval for the reclassification is good news for potential acquirers as it guarantees no interference from the government on future decision making related to IDBI Bank.
