IDBI Bank Shares Crash 16 Percent After Reports Govt May Scrap Stake Sale

Shares of IDBI Bank fell as much as 16 percent in early trade on Monday after reports said the government may scrap the ongoing strategic sale process for the lender due to low price bids.

The stock dropped to Rs 77.66 during morning trade following reports over the weekend that the government could halt the long running privatisation effort.

According to reports by Bloomberg and Reuters, the government is likely to scrap the bids received for selling its majority stake in the bank as the offers fell short of the reserve price set for the transaction. The move would effectively stop the current sale process.

The government and Life Insurance Corporation of India had initiated the strategic disinvestment in 2022 with plans to sell around a 60.7 percent stake in the lender.

At present, the government holds a 45.5 percent equity stake in IDBI Bank and plans to divest 30.5 percent. LIC owns 49.2 percent and is looking to sell 30.2 percent of its holding.

The combined stake sale was estimated to fetch about Rs 66,000 crore.

Earlier reports indicated that Canada based Fairfax Financial Holdings and Dubai’s Emirates NBD were among the bidders for the stake sale.

The government may consider launching a fresh sale process later when market conditions improve and stronger investor interest emerges, according to a government source cited by Reuters.

The planned sale of IDBI Bank has been one of the government’s major privatisation initiatives aimed at reducing state ownership in the banking sector.

Despite the setback in the disinvestment process, IDBI Bank has returned to profitability in recent years after capital support and efforts to reduce non performing assets.

Over the past year, the bank’s stock has gained about 9.2 percent. In comparison, the Nifty 50 index has risen about 3.4 percent during the same period.