IDBI Bank has gained nearly 15% on Dalal Street during Thursday's trading session after the Cabinet Committee on Economic Affairs, gave its in-principle approval for strategic disinvestment along with transfer of management control in the bank.
At present, the government and Life Insurance Corporation of India (LIC) together hold 94% of the equity of IDBI Bank. The government holds a 45.48% stake, while LIC has 49.24% shareholding.
Also, currently, LIC is the promoter of IDBI Bank with Management Control and GoI is the co-promoter.
CCEA on Wednesday said, "The extent of respective shareholding to be divested by GoI and LIC shall be decided at the time of structuring of transaction in consultation with RBI."
Further, CCEA stated that it is expected that strategic buyer will infuse funds, new technology and best management practices for optimal development of business potential and growth of IDBI Bank Ltd. and shall generate more business without any dependence on LIC and Government assistance/funds. Resources through strategic disinvestment of Govt. equity from the transaction would be used to finance developmental programmes of the Government benefiting the citizens.
LIC's board has passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bank Ltd. through divesting its stake along with strategic stake sale envisaged by the Govt. with an intent to relinquish management control and by taking into consideration price, market outlook, statutory stipulation and interest of policyholders.
Notably, this decision of the LIC's Board is also consistent with the regulatory mandate to reduce its stake in the Bank.
At around 11.04 am, IDBI Bank is trading at Rs40.80 per piece higher by 7.51% on Sensex.
In the early trade, IDBI Bank has touched an intraday high of Rs43.50 per piece - rising by at least 14.6% so far today on Sensex.