The long-drawn-out divestment process at IDBI Bank has finally progressed to the next stage, with global consultancy firm KPMG conducting closing due diligence on the lender, sources have said. The report will be placed before the bank board after which it will be shared with potential suitors to form the basis for financial bids.
“Closing due diligence commenced about a week ago,” said a highly placed source aware of the development, who affirmed that the process is still in its initial stages. “It may take about a month to conclude,” the source said.
Once this concludes, the department of Investment and Public Assets Management (DIPAM) will ask interested investors to furnish bids to acquire a 60.7 percent stake in IDBI Bank. With bids unlikely to be invited before March, IDBI Bank divestment will likely be pushed to FY26.
As the process has reached the stage of closing due diligence, there may not be more delays in the divestment schedule, sources said.
Why closing diligence is critical
Often seen as an important step ahead of a deal closure, especially when there is a long delay in the process, closing due diligence is done to ensure that important assumptions made in the transaction documents remain relevant.
In case of any changes, the same are updated to revise valuations of the entity on the block.
Conducting a closing diligence is also seen as a good corporate governance practice.
In IDBI Bank’s case, KPMG conducted a vendor due diligence in December 2020, the findings of which formed the basis for interested investors to furnish their expression of interest (EOI) which opened in October 2022.
In January 2023, government officials were quoted as saying that they were happy with the EOIs received for IDBI Bank.
Around September last year, the Reserve Bank of India cleared a few interested investors as “fit and proper” to make a financial bid for the bank.
According to reports, Prem Watsa-led Fairfax, Kotak Mahindra Bank and Emirates NBD expressed interest in acquiring a 60.7 percent in the divestment process.
“Being a listed entity, closing due diligence would (be) equivalent to updating the vendor due diligence report,” said a senior executive involved in the process. The executive didn’t wish to be identified, as he is not authorised to speak to media.
An email sent to DIPAM remained unanswered. A spokesperson for KPMG said, “As a policy, we cannot comment on any company specific matter”.
The government’s decision to divest stake in IDBI Bank was announced in Budget 2021. Almost a year later, Life Insurance Corporation of India and the government decided to offload 30.24 percent and 30.48 percent stake respectively in the bank.
At 3.06 pm, the IDBI Bank stock was trading at Rs 73.10 on the National Stock Exchange, down 6.16 percent from the previous close.
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