The Indian government has commenced the process of reducing its equity in select public-sector banks (PSBs) and listed public financial institutions (PFIs) as part of its financial sector reforms.
The Department of Investment and Public Asset Management (DIPAM) currently eyes bids from merchant bankers and legal advisors.
This initiative aligns with the government’s disinvestment strategy and aims to comply with Securities and Exchange Board of India (SEBI) norms.
Finance Minister Nirmala Sitharaman previously announced the government’s plan to privatise two PSBs and IDBI Bank in her 2021-22 budget speech.
DIPAM has issued a Request for Proposal (RFP) for transaction advisors for a three-year term, with an option for a one-year extension.
The disinvestment strategy requires five public-sector lenders – Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Central Bank of India, and Punjab and Sind Bank – to reduce government stakes to below 75%.
This move ensures compliance with SEBI’s minimum public shareholding (MPS) norms, which mandate a minimum public shareholding of 25% for all listed firms.
The government holds majority shares in other financial institutions, including 82.4% in GIC Re, 85.44% in New India Assurance Company, and 96.5% in Life Insurance Corporation (LIC).
LIC has been granted time until 16 May 2027 by SEBI to achieve 10% public shareholding.
The DIPAM notification outlines that bidders must have completed at least two equity capital market transactions in the banking, financial services, and insurance (BFSI) sector between 1 April 2022 and the day before bid submission.
Merchant bankers will manage all transaction aspects, including advising the Government of India on equity dilution timing and modalities in select PSBs and listed PFIs, using SEBI-approved methods.
They will also structure transactions in accordance with regulations from SEBI, stock exchanges, and other relevant statutes.
Their responsibilities include conducting market surveys, organising roadshows to attract investor interest, and arranging meetings with domestic and international investors.
Additionally, they will market the banks’ growth potential and strategically position the lenders for investment.
Merchant bankers will also handle due diligence activities, prepare necessary documents, and coordinate with intermediaries to ensure compliance with regulatory and statutory requirements, updating documents as needed.
“Indian government invites bids from advisors for stake sale in PSBs ” was originally created and published by Retail Banker International, a GlobalData owned brand.
