While the names of several foreign banks are making the rounds about filing an expression of interest to acquire 60.72 per cent of IDBI Bank’s shares, Kotak Mahindra Bank may be among the few Indian entities also in the fight for the bank.
Senior sources say that Uday Kotak, MD & CEO and promoter of Kotak Mahindra Bank, appears to have shown interest in acquiring a majority stake in IDBI Bank.
An email sent to Kotak Mahindra Bank remained unanswered as of press time. Kotak Mahindra’s balance sheet as of December 31, 2022 was Rs 464,784 crore while IDBI Bank’s was Rs 306,619 crore. In terms of market capitalization, Kotak Bank is valued at around ₹3.5 lakh crore and IDBI Bank at ₹53,654 crore.
However, it is not yet clear whether IDBI Bank will merge with Kotak Bank or remain separate as a partner. “Given IDBI Bank’s current shareholding, he can be retained as a Kotak Bank associate for at least the first 4-5 years after the stake is acquired,” another senior source said.
The RBI had allowed State Bank of India to keep its 40 per cent stake in YES Bank as an associated company in March 2020, possibly setting a precedent for such structures.
According to another source familiar with the development, while IDBI Bank is nearly 100 percent provisioned for all stress and has significantly changed its composition with around 40 percent of its loan book skewed toward corporate lending, without immediately merging the matching the bank’s books with that of the acquirer may be a prudent strategy.
In 2019, Uday Kotak was quoted in Line of business such as advocating for the public-private partnership model in banks “incorporating a private sector bank as a strategic partner in the former in a transparent manner”.
The government, along with Life Insurance Corporation of India (LIC), had collectively put 60.72 percent of the bank’s shares up for sale last year. Expression of interest was invited until January 7, 2023.
After the strategic divestment, the participation of the government and LIC in IDBI Bank would be 15% and 19%, respectively. Financial offers are said to be opened in September and IDBI Bank’s stake sale is expected to conclude this year.
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