The Ministry of Finance issued a clarification on the strategic restructuring process of IDBI Bank, detailing the two-phase bidding procedure conducted by DIPAM. The initial bid round in FY2025-26 followed indicative guidelines rather than rigid rules, providing flexibility for complex strategic transactions. There was no a-priori benchmark for bidding, with bidders conducting their own valuations while independent agencies performed contemporaneous fair valuations for comparison purposes.
The process included specific provisions for situations where the highest bid falls below the reserve price, with Para 5.3.6(iii) of the RFP granting the Government of India discretion over further course of action. Special powers were delegated to the Core Group of Secretaries on Disinvestment (CGD) by the Cabinet Committee of Economic Affairs in its August 16, 2017 meeting, authorizing them to make procedural deviations for effective implementation of strategic disinvestment transactions.
The CGD determined the procedure for the second best offer round without changing the reserve price, rendering the first round functus officio after initial bids were not approved. The entire valuation methodology was reviewed by CGD in April 2026 before inviting best offer bids, using contemporaneous valuations based on March 31, 2026 financial accounts released in end-April. The process maintained double-blind integrity where bidders didn't know valuations and valuators didn't see bids.
Valuation was conducted by two independent advisers using distinct methodologies, with the Transaction Adviser employing professional experts trained in Market Multiple Method. Due to lack of suitable comparable transactions, the Comparable Companies Method was used, comparing against all listed public sector banks. The clarification notes IDBI Bank's regulatory status changed from government 'owned' to government 'controlled' after LIC acquired majority stakes in 2019, with RBI treating it as a private bank for regulatory purposes despite majority government ownership.
The Asset Valuer incorporated additional value for disputed tax demands indemnified by bidders, which represented a low probability event and revenue neutral position for the government. The potential liability was only ₹627 crores while the bid discovered price enhanced by ₹3,917 crores, significantly increasing transaction value for GoI and LIC. The volatile stock price of the narrowly traded IDBI stock was discarded as unreliable, with GoI and LIC retaining residual shareholdings to benefit from expected value enhancement following strategic restructuring.