The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, on Wednesday has given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd.
About IDBI Bank
IDBI Bank is set up under a separate act of parliament, which allows for easier divestment.
This is in contrast to other public sector banks, where the Bank Nationalisation Act would need to be amended before the government can reduce its shareholding to below 51%.
Statment from Govt.
“The extent of respective shareholding to be divested by GoI and LIC shall be decided at the time of structuring of transaction in consultation with Reserve Bank of India.”
Share Holdings
The government currently owns a 45.48% stake in IDBI Bank while Life Insurance Corporation (LIC) owns 49.24% controlling stake in the lender.
LIC is currently the promoter of IDBI Bank with Management Control and the government is the co-promoter.
Utilisation
Resources through strategic disinvestment of Govt. equity from the transaction would be used to finance developmental programmes of the Government benefiting the citizens.
It is expected that strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank and shall generate more business without any dependence on LIC and government assistance/funds.
Impact on Stock
IDBI Bank share price jumped over 9 percent in the morning session on May 6 .
The stock was trading at Rs 41.45, up Rs 3.50, or 9.22 percent at 09:30 hours. It has touched an intraday high of Rs 43.50 and an intraday low of Rs 41.
IDBI Performance
IDBI Bank reported a nearly four-fold jump in its standalone profit after tax to ₹512 crore in the March quarter compared to ₹135 crore in the year-ago period on the back of an impressive 38% growth in its net interest income (NII).
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