IDBI Bank Revaluation Underway by Indian Government
The Indian government has initiated a new valuation process for IDBI Bank as part of its renewed efforts to sell its stake. The valuation process, which is expected to last about a month, is seen as a crucial step in determining the future course of action for the sale. This information comes from a senior government official and was reported by Moneycontrol. This fresh valuation will serve as a reference point for any subsequent stake sale.
Revaluation Amidst Challenging Market Conditions
The revaluation move comes in the wake of a failed strategic sale process. The official was quoted as saying, “These are difficult times for the transaction. We are still in the process of valuation and no decision has been taken yet. The fresh valuation itself will take about a month to complete, and only after that will we be in a position to take a call.” In light of the challenges, the government is reassessing its price assumptions given the current softer market.
Uncertain Next Steps for Stake Sale
Whilst the government has not yet decided whether to invite fresh expressions of interest, this is a matter that will be evaluated once the valuation exercise is completed. The government’s flexibility in negotiations has been curtailed by the recent fall in IDBI Bank’s share price, which has dropped from Rs 118 to the low Rs 70 range. This has raised the risk that a sale at current levels could reduce returns for public shareholders.
Reworking the Proposed Transaction
The Centre and Life Insurance Corporation of India (LIC), who jointly own a controlling stake in IDBI Bank, are reworking the proposed transaction with the intention of improving value realisation. There have been offers from Fairfax India Holdings and Emirates NBD, but these were reported to be below internal valuation thresholds.
Adjusting Approach for Future Sale Process
In response to the fluctuating market conditions, officials are modifying their approach for the next stage of the process. The earlier method was characterized by strong market signalling and a rapid rise in the stock. However, any renewed effort to sell the stake in IDBI Bank is expected to be executed more cautiously, aiming to limit speculative movements in the share price and keeping valuations tied to fundamentals.
Government Rethinks Disinvestment Plan
The latest valuation exercise indicates a broader reconsideration of the government’s disinvestment plan for the lender. The government official stated that the approach moving forward will need to be more measured, working quietly rather than building expectations too early. This current method appears to be the most appropriate way forward at this time.
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