While names of several foreign banks are doing the rounds for submitting the expression of interest to acquire 60.72 per cent stake in IDBI Bank, Kotak Mahindra Bank may be among the few Indian entities also in the fray for the bank.
Highly placed sources say that Uday Kotak, MD & CEO and promoter of Kotak Mahindra Bank, is said to have shown interest in taking majority stake at IDBI Bank.
An e-mail sent to Kotak Mahindra Bank remained unanswered till press time. Kotak Mahindra’s balance sheet as on December 31, 2022 stood at ₹4,64,784 crore, while that of IDBI Bank was ₹3,06,619 crore. In terms of market capitalisation, Kotak Bank is valued at around ₹3.5-lakh crore and IDBI Bank at ₹53,654 crore.
However, it is not clear yet if IDBI Bank will be merged into Kotak Bank or retained separately as an associate. “Given the present shareholding of IDBI Bank, it may be retained as an associate to Kotak Bank at least for the initial 4–5 years after the stake acquisition,” said another highly placed source.
The RBI had permitted State Bank of India to hold its 40 per cent stake in YES Bank as an associate company in March 2020, thus possibly setting precedence for such structures.
According to another source privy to the development, while IDBI Bank has a near 100 per cent provisioning for all the stress and has significantly changed its composition with around 40 per cent of its loan book tilted to corporate loans, not immediately merging the books of the bank with the acquirer’s may be a prudent strategy.
In 2019, Uday Kotak was quoted in businessline as advocating the public-private partnership model in banks “by inducting 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 placed 60.72 per cent stake held in the bank for sale last year. Expression of interest was invited till January 7, 2023.
Post the strategic divestment, the government and LIC’s stake in IDBI Bank would be 15 per cent and 19 per cent, respectively. Financial bids are said to open by September and IDBI Bank stake sale is expected to conclude this year.