Centre reviews IDBI Bank stake sale
What's the story
The Indian government is looking for ways to revive the stalled sale of a majority stake in IDBI Bank. The move comes after bids earlier this year fell short of expectations. As per the Economic Times, one option being considered is lowering the reserve price by up to 20%. This would make the deal more attractive to potential buyers.
Pricing strategy
Authorities explore options to determine price reflecting bank's intrinsic value
The authorities are also looking at ways to make a deal feasible by determining a price that reflects the bank's intrinsic value. This would mean reducing dependence on its market price. The strategies are still in the early stages and could change. The government has not publicly disclosed the minimum reserve price in previous attempts to sell IDBI Bank.
Market performance
IDBI Bank's shares have fallen nearly 32% this year
IDBI Bank's shares have fallen nearly 32% this year, underperforming the Nifty Bank Index which has dropped 10%. The Indian government had previously scrapped bids for IDBI Bank as they were below the minimum price. Fairfax Financial Holdings Ltd., founded by Indian-born Canadian billionaire Prem Watsa, was the front-runner to buy the stake along with Emirates NBD PJSC.
Future prospects
Finance Minister says authorities will continue with divestment
Finance Minister Nirmala Sitharaman has said that authorities will continue with the divestment. The government and state-run Life Insurance Corporation of India together own around 95% of IDBI Bank. They had planned to sell a combined 60.7% stake. Kotak Mahindra Bank Ltd., which had shown interest in IDBI Bank, did not bid due to high valuation.