BENGALURU, Mar 16 (Reuters) – Shares of IDBI Bank (IDBI.NS), slumped as much as 16.5% on Monday after reports that the Indian government would shelve bids for a majority stake in the lender, as the offers were below the minimum price expectation.
The shares were trading 15.2% lower at 78.20 rupees as of 12:57 a.m. IST, set for their biggest single-day drop since June 2024.
The government has been trying to sell a stake in IDBI Bank for the last four years as part of a broader push to privatise state-run firms. The planned sale included a 30.48% stake held by the government and a 30.24% stake by state-run insurer Life Insurance Corp (LIFI.NS), , which had rescued IDBI in 2018 after it was weighed down by bad loans.
The government had planned to complete the sale by the end of this month.
IDBI said in an exchange filing that it had received no government communication on the disinvestment process, which it said was being handled by the Department of Investment and Public Asset Management and did not involve the bank.
The tepid interest for IDBI Bank contrasts with strong foreign investor appetite for Indian lenders, underscored by Emirates NBD’s (ENBD.DU), buying a 60% stake in RBL Bank (RATB.NS), for $3 billion and Sumitomo Mitsui Banking Corp (8316.T), acquiring a 24% stake in Yes Bank (YESB.NS), .
IDBI’s stake sale had attracted bids from the Canadian investment group Fairfax Financial (FFH.TO), and Emirates NBD, Reuters reported in February.
A source told Reuters on Friday that the government may initiate a fresh process for IDBI Bank when market appetite improves.
The run-up in IDBI’s stock ahead of the expected deal has now reversed since the transaction has fallen through, said Vinit Bolinjkar, head of research at Ventura Securities, though he has no concerns about the bank’s fundamentals.
Until Friday’s close, the shares had gained 116% since October 2022, when the divestment process was first announced. The state-run bank index (.NIFTYPSU), rose 182% over the same period.
The finance ministry did not immediately respond to Reuters’ requests for comment on Monday.
($1 = 92.4525 Indian rupees)