Financial due diligence underway at IDBI Bank

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IDBI Bank’s divestment process has moved to the next stage. Financial due diligence is currently being conducted in the Bank by bidders who have shown interest in acquiring 60.72 percent of the Bank’s stake.

Informed sources say that the financial due diligence, for the purpose of continuing liquidation, started in the first week of July. A high-ranking source said, “A specialized team has been formed in the bank to deal with this process.” The process is expected to be completed by September, and final bids may be submitted by December.

As I mentioned Business line Earlier, Kotak Mahindra Bank and Canadian billionaire Prem Watsa led by Fairfax India Holdings showed interest in buying majority stake in IDBI Bank. The other bidders are said to be Sumitomo Mitsui Financial Group and Emirates NBD Bank.

Smooth process

IDBI Bank’s financial statements went through a detailed pre-divestment audit round as part of vendor due diligence conducted by KPMG in December 2020. The purpose was to ascertain the quality of the bank’s post-Covid loan book and the quality of its assets. This was a precursor to the liquidation process that began in October 2022 when the Department of Investment and Public Asset Management (DIPAM) invited bids to liquidate 60.73% of the government stake and the LIC to offload 30.48% and 30.24% respectively.

The bank’s financial statements have improved significantly since the last round of due diligence conducted over two years ago. Much of the Covid related pains are well assessed and a reasonable portion of the stressful loans are well catered for. Therefore, financial due diligence is expected to be a smooth process that should be completed within specified timelines,” said another person with knowledge of the matter.

The government is keen to finalize the deal by March 2024, according to the sources.

IDBI Bank was bailed out by LIC when it acquired a 51 percent stake in the bank from the government in 2019. In February 2020, the government announced its intention to divest its holdings in the bank and in October 2022, it opened bids for the same. . On January 7, 2023, DIPAM said it had received several strategic liquidation EoIs at IDBI Bank.