Govt ready to bring IDBI Bank stake to under 50pc: Arun Jaitley

MUMBAI: In a step that indicated an openness to privatizing state-owned banks, Union finance minister Arun Jaitley on Monday said the government is committed to reducing its stake in IDBI Bank to under 50%. Jaitley's comment was part of the Union budget announcements dealing with banking sector reforms. The government directly owned a 76.5% stake in IDBI Bank as of September. It held an additional 13.88% through public sector entities such as Life Insurance Corp. of India.

The announcement was followed by the IDBI Bank stock rising over 8%. At 12.12pm, the bank's stock was trading at Rs.60.15 on BSE, up 8.09% from its previous close. The move will come as a pleasant surprise to most investors who are looking to invest in the bank's qualified institutional placement (QIP) offer.

Earlier this month, markets regulator Securities and Exchanges Board of India (Sebi) gave its nod for IDBI Bank to raise Rs.3,771 crore through the QIP route. A QIP offer is a sale of securities to institutional investors by listed firms.

On 31 December, IDBI Bank informed stock exchanges that the government had approved its plan to raise Rs.3,771 crore through a QIP. In January, the bank hired Citibank, HSBC, Credit Suisse, Deutsche Bank, SBI Capital, Bank of America and its own investment banking arm IDBI Capital to manage the fund raising.

The bank, however, has not announced any timeline for the launch of the QIP. IDBI Bank had held investor roadshows between 14 January and 25 January to gauge foreign investor sentiment towards the proposed QIP. Merchant bankers representing the state-owned bank met some "large and meaningful" foreign institutional investors (FIIs) in the US, Europe and Asia, Mint reported on 28 January.

During the roadshows, investors sought clarity on how much stake the government would eventually hold and whether the bank would actually function like a private lender.

"Investors have sought clarity on the government's stand on ownership of the bank, whether the government would like to hold 51% stake in the bank or lower. This is important to the investors as they want to understand if the bank will be allowed to operate as a private lender," a banker involved in the roadshows had told Mint earlier.