IDBI Bank shares tank over 7 pc as govt clears Rs 52,878 crore stake sale to Fairfax
New Delhi, Oct 15 (IANS) IDBI Bank shares on Thursday declined more than 7 per cent in morning trade after the Cabinet Committee on Economic Affairs (CCEA) approved strategic restructuring of the lender.
The banking stock plunged as much as 7.45 per cent to Rs 83.70, hitting an intraday low in morning trade at around 10 am on the BSE.
At last count, the stock was trading at Rs 84.20, down almost 7 per cent.
In the last one-year horizon, the banking stock tumbled around 10 per cent and 19 per cent year-to-date.
The CCEA has approved sale of an aggregate 60.72 per cent equity stake in IDBI Bank to Canada Inc., whose parent company is Fairfax Financial Holdings, for Rs 52,878 crore.
Of the total equity stake to be sold, the government’s share would be 30.48 per cent and Life Insurance Corporation of India’s (LIC) share would be 30.24 per cent, leaving a residual shareholding of 15 per cent with the government and 19 per cent with the LIC.
Moreover, Finance Minister Nirmala Sitharaman described the transaction as a strategic restructuring rather than strategic disinvestment and clarified that the government and LIC will continue to hold stakes in the bank.
Due to its poor financial health, the bank required repeated infusion of capital, initially provided by government and later by the state-owned insurance firm.
After comprehensive evaluation by the CGD and after considering the recommendations of the Alternative Mechanism, the CCEA approved Canada Inc. (parent entity Fairfax Financial Holdings Ltd.) as the strategic buyer for the transaction for a purchase consideration of Rs 52,878.0806181 crore for the acquisition of 60.72 per cent stake in the IDBI Bank Ltd.
However, the successful bidder will be required to present its credentials to the Reserve Bank of India in accordance with the Fit and Proper Assessment conducted at the EoI stage and submit its roadmap for the compliance of regulatory conditions prescribed therein, an official statement said.
It further noted that once completed, this will be the largest FDI in the financial sector of our economy so far.
–IANS
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