IDBI Bank Sale: KPMG India emerges as front-runner for role of Transaction Advisor

IDBI Bank

KPMG India has emerged as the front-runner for the role of transaction advisor for the strategic sale process of IDBI Bank, one of the several high –profile deals which are part of the government’s mega disinvestment programme, multiple industry sources in the know told Moneycontrol.

The evaluation process was carried out by DIPAM (Department of Investment & Public Asset Management), the nodal arm of the Finance Ministry for PSU stake sales.

“Post the technical rounds and financial bids, KPMG India has emerged as the lead contender for the role. A few formalities are underway,” said one of the persons cited above.

Two other persons confirmed that KPMG was ahead of other suitors in the race for the role, adding that the process for selecting a legal advisor for the deal was currently underway.

All the three persons above spoke to Moneycontrol on the condition of anonymity.

In  response to an email query from Moneycontrol, a KPMG India spokesperson said, “This process is still ongoing and we cannot comment on it at the moment.” We could not elicit an immediate comment from DIPAM.

According to a recent PTI report, the other firms that had bid for the role of transaction advisor included Ernst and Young LLP, Deloitte Touche Tohmatsu India LLP, ICICI Securities, JM Financial Ltd, RBSA Capital Advisors LLP and SBI Capital Markets.

In June, the government had invited bids from reputed professional consulting firms / investment bankers / merchant bankers / financial institutions / banks, for facilitating/assisting DIPAM in the process of strategic disinvestment of IDBI Bank Ltd. along with transfer of management control, till completion of the transaction. The last date for bid submission was July 13, which was later extended till July 22. All the bidders had made a virtual presentation on August 10.

ROLE OF THE TRANSACTION ADVISOR

The Transaction Advisor would be required to advise and assist the government on modalities of disinvestment and the timing; recommend the need for other intermediaries required for the process of sale/disinvestment and also help in identification and selection of the same with proper Terms of Reference; preparation of all documents like Preliminary Information Memorandum (PIM), organise roadshows, suggest measures to fetch optimum value.

The advisor would also be supporting IDBI Bank in setting up of the e-data room and assisting in the smooth conduct of the due diligence process. Over and above this, the advisor would help to organize roadshows and generate interest among the prospective buyers.

IDBI BANK: THE GOVERNMENT’S ACTION PLAN

In May, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, had given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd. The extent of respective shareholding to be divested by GoI and LIC was to be decided at the time of structuring of transaction in consultation with RBI.

The government and LIC together own more than 94% of equity of IDBI Bank (GoI 45.48%, LIC 49.24%).  LIC is currently the promoter of IDBI Bank with management control and GoI is the co-promoter.

An official release in May on the expected role of the acquirer said, “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 Ltd. and shall generate more business without any dependence on LIC and Government assistance/funds.”

The release added, "Resources through strategic disinvestment of Govt. equity from the transaction would be used to finance developmental programmes of the Government benefiting the citizens."

IDBI Bank recently reported a more than four-fold jump in standalone net profit to Rs 603.30 crore for the first quarter of the current financial year helped by a decline in bad loans. The lender had posted a net profit of Rs 144.43 crore for April-June 2020-21. Total income rose to Rs 6,554.95 crore during the period from Rs 5,901.02 crore in the same quarter of the last fiscal, IDBI Bank said in a regulatory filing.

The bank’s asset quality improved with gross non-performing assets (NPAs) falling to 22.71 percent of the gross advances as of June 30, 2021 from 26.81 percent by June 2020.

GOVT IN PRIVATIZATION MODE

Speaking at the annual session of the industry body Confederation of Indian Industries on August 11 , Tuhin Kanta Pandey, Secretary, DIPAM had said, “We intend to do Air India this year, BPCL privatization we want to complete this year. Shipping Corp, BEML, Pawan Hans and NINL, these are the transactions where we have substantial interest from bidders and we are now completing that second stage of due diligence and bidding, which we hope to complete this FY.”

Pandey also said the process of the sale of IDBI Bank to a private bank has begun with cabinet clearance, while the expression of interest for Container Corp is expected soon.

Also Read:- Confident of completing Air India, BPCL privatisation this fiscal: DIPAM Secretary

In the budget for 2021-22, Finance Minister Nirmala Sitharaman had said the process of privatisation of IDBI Bank would be completed in the current fiscal. The government aims to mop up Rs 1.75 lakh crore in the current fiscal from minority stake sale and privatisation.

Of the Rs 1.75 lakh crore, Rs 1 lakh crore is to come from selling government stake in public sector banks and financial institutions while Rs 75,000 crore would come as CPSE disinvestment receipts. So far in the current fiscal the government has mobilised Rs 7,648 crore as disinvestment receipts.