Shares of IDBI Bank surged nearly 10 per cent on Monday after the government invited bids for privatising the lender. The stock soared 9.95 per cent to trade at Rs 46.95 in afternoon trade. During the day, it touched an intraday high of Rs 47.40.
The government would sell a 30.48 per cent and Life Insurance Corporation (LIC) would offload a 30.24 per cent stake, aggregating to 60.72 per cent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank, the Department of Investment and Public Asset Management (DIPAM) said.
“IDBI Bank in action on the back of strategic disinvestment news. It’s been a long waiting process to divest IDBI, wherein earlier attempts, the disinvestment process did not go ahead due to many reasons. But this time post-Air India disinvestment, the government is confident to move it fast,” said Prashanth Tapse, Research Analyst, Senior VP (Research), Mehta Equities.
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“We remain neutral on this development,” he added.
After the stake sale, combined shareholding of LIC and the Centre would come down to 34 per cent.
Technical View
“The counter is coming out from long consolidation and is in process of forming the right shoulder of the inverse head and shoulder pattern in the long-term timeframe. The overall structure is remunerative as it trades above its all-important moving averages. MACD (Moving average convergence divergence) are supporting the current strength whereas the momentum indicator RSI (relative strength index) is also positively poised,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.
“On the upside, Rs 48 is the neckline and an immediate hurdle; above this, we can expect a move towards Rs 60. On the Downside, Rs 40 is a strong demand zone at any pullback,” he added.
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Currently, the government and LIC hold a 94.72 per cent stake together in IDBI Bank. LIC holds a 49.24 per cent stake in IDBI Bank, while the Centre holds a 45.48 per cent stake. Public shareholders hold a 5.2 per cent stake in the financial institution.
IDBI Bank was categorised as a private sector bank by the Reserve Bank of India (RBI) with effect from January 21, 2019, consequent upon LIC acquiring 51 per cent of the total paid-up equity share capital of the lender.
While inviting Expressions of Interest (EoI), DIPAM said that a potential investor should have a minimum net worth of Rs 22,500 crore, and must report a profit in three out of the past five years to be eligible for the bidding process.
The successful bidder would be required to mandatorily lock in at least 40 per cent of the equity capital for five years from the date of acquisition. The last date for submission of bids or EoI by potential buyers is December 16.
The government has set a target of garnering Rs 65,000 crore from divestment in 2022-23 (April-March), out of which it has already raised Rs 24,544 crore.
