The government is planning to cut the reserve price for IDBI Bank in a bid to attract buyers for the lender.
In its latest attempt to divest its stake in the bank, the government is planning to reduce the reserve price by up to 20 percent, Bloomberg reported.
This is one of the options being considered by the government to make the deal feasible.
The government had to stall the privatisation process of the bank in March as it had received bids lower than the reserve price.
Potential bidders such as Fairfax India Holdings and Emirates NBD had submitted bids that fell short of the government’s internal valuation expectations.
The government has a stake of 45.48 percent in the Mumbai-headquartered bank, while the Life Insurance Corporation of India (LIC) holds 49.24 percent. This brings their combined ownership to 94.72 percent.
The Centre and LIC were in the process of selling close to 60.72 percent of their combined stake. As per the current market price, this amounted to about $6.5 billion.
The sale of IDBI Bank was among the various proposed disinvestment plans of the government, of which only Air India has succeeded so far.
The move to divest IDBI Bank was first announced by then Finance Minister Arun Jaitley in 2016 during his Budget speech.
While the Centre also wanted to privatise Shipping Corporation, BEML (formerly Bharat Earth Movers Limited), and Bharat Petroleum, there has been no material progress on this front.
Finance Minister Nirmala Sitharaman had recently said that the government would continue the process of divestment.
The government is looking to determine if more bidders could be brought into the process to improve the chances of finding a buyer.
IDBI Bank’s shares have lost 32 percent in value on the bourses this year. This is significantly higher than the 10 percent decline in the Nifty Bank Index.
