‘We are in a position to start due diligence and private data room access shortly.’
IMAGE: IDBI Bank headquarter in Mumbai. Photograph: Niharika Kulkarni/Reuters
The divestment of IDBI Bank is gaining pace, says Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), and financial bids for the bank could be called before the end of this financial year.
In a conversation with Harsh Kumar and Shrimi Choudhary/Business Standard in New Delhi, he says the government is more in favour of a calibrated strategy rather than setting a big-bang target.
What is the status of IDBI Bank divestment?
I think it (clearance from the Reserve Bank of India) will be there any moment.
We are in a position to start due diligence and private data room access shortly (this will allow bidders to obtain detailed financial information about the company).
Further, much will depend on how potential bidders would look at it.
We should have the bids before the end of this financial year.
Could we see more of a minority stake sale instead of a big-ticket divestment?
Yes, that could be more in sync with a calibrated strategy.
This is to ensure that State-run firms continue to create value and wealth.
And it is difficult to envisage a good value-creation model unless and until we bring the stock markets in.
External accountability in the form of market accountability comes in only when it becomes a market player.
And it becomes a market player when it is listed, which means we must divest.
Another route is the merger and acquisition process, which is time-consuming.
Besides, it is susceptible to risk and it may not materialise.
And at the end of the day your bids may fail and you may have to do the entire rebidding process, like in the case of Bharat Petroleum Corporation.
If big-ticket divestment happens, it is fine, but if it does not happen, you get nothing.
The finance minister has said Cabinet decisions will be honoured so we will do it.
But there is a practical realisation that it is not a ‘tap approach’ — you just open the tap and it gets done.
It is about the acquisition of a company and even private firms’ merger did not work out.
But our effort will be that whatever we have on the table, we will try to conclude particularly where we have at least issued an expression of interest (EOI).
In some cases, we have not been able to issue an EOI yet.
When can financial bids for Shipping Corporation of India be expected?
It seems Shipping Corporation of India Ltd (SCIL) has some documentation issues.
One notable point is that listing has occurred, so Shipping Corporation of India Land & Assets Ltd (SCILAL) has been listed.
Consequently, there will be changes in government documents because now SCILAL is a separate company, and many of their leases are in the name of SCIL.
Therefore, all those leases and other documentation need to be updated.
This is a critical aspect. In many public-sector cases, documentation hasn’t been clear.
When they acquired land, often the leases weren’t in place — there might just be a letter.
At that time, public-sector investment was common, so the state government would simply allocate land with few formalities.
We’re now asking them to obtain proper documentation to ensure private-sector involvement.
The private sector is particular about this; they scrutinise every document meticulously with their lawyers during due diligence.
We’ve asked the administrative ministry along with their central public-sector enterprises (CPSEs) to address these issues.
The problems have been identified, and they will be sorted out.
There are a number of public-sector firms that are yet to be listed. Any plans?
We will see some listing of the subsidiaries of CPSEs. They are not necessarily government companies, but the companies of public-sector entities.
For example, NTPC Green. The company has created a lot of green assets and a subsidiary and put those assets there.
That is a possible candidate. I think it can come this year.
Will you go slow on a further stake sale in Life Insurance Corporation?
We keep doing transactions depending on our opportunities. Wherever the float is low, we have to increase it, according to a Sebi rule.
But when and how much we don’t want to disclose.
Do you think the qualified institutional placement (QIP) route is effective for diluting stakes to fulfil the minimum public shareholding norms of Sebi?
Does QIP provide a soft cushion to state-run banks?
There are two key aspects. One is divestment up to 49 per cent, meaning the government retains 51 per cent of the stake.
The other is the government getting out, which means reducing its stake to less than 51 per cent or getting out of the company. This is a watershed moment.
In the first category, listing and other requirements are necessary. For example, bank listing is compulsory.
This means you cannot have a bank now that is 100 per cent owned by the government; 25 per cent must be publicly held.
In fact, in some cases, we are reaching this threshold because we have to recapitalise the banks.
A reprieve has been given under the government’s powers, according to the Securities Contracts (Regulation) Rules, providing an extension up to 2026.
The issue was that many banks were actually in the “Minimum Public Shareholding” zone.
Since the government had to inject money, no other entity would have invested in a problematic bank.
Consequently, the government’s equity has increased.
Now, when they are raising capital through QIP, they can raise capital whenever needed.
Since they are performing well, investors are prepared to subscribe to their capital.
QIP is a very good route because banks are capital-intensive and always require capital.
One advantage of being listed on the stock markets is that the government no longer has to inject money.
Instead, banks have started giving dividends.
I think we are now in a more market-friendly framework regarding banks.
They are able to raise capital through QIP, give dividends, and show good results.
Their non-performing assets are under control. This is essential for a healthy financial sector.
Interim Budget onwards, there is no specific divestment target… and it is now part of miscellaneous capital receipts.
But the Rs 50,000 crore for FY25 as mentioned, how you planning to achieve?
It is miscellaneous capital receipts, it may include wherever we are divesting, or asset monetisation to that extent, that receipts are accruing to the consolidated fund.
Because entire asset monetisation may not accrue to the CFI.
If you look at the Revised Estimates (RE) figure, capital receipts of Rs 30,000 crore in FY24 include divestment. We collected Rs 16,500 through divestment.
Feature Presentation: Aslam Hunani/Rediff.com
