ING has been examining the books of the state-owned lender in recent weeks and some members of its top brass were in New Delhi recently, to discuss the matter with senior officials, they said. One of the officials mentioned above said ING has submitted an expression of interest (EoI) for IDBI Bank, while the other said it would do so at a later stage.
Value Maximisation
The government and Life Insurance Corporation of India (LIC) together are looking to sell 60.72% of IDBI Bank. Five to seven prospective candidates are believed to have submitted EoIs ahead of the January 7 deadline.
It’s not clear if ING met the deadline, but some officials said the government might entertain good offers that come in subsequently, as it seeks value maximisation.
The Reserve Bank of India, too, would be receptive to global banks like ING making IDBI a subsidiary instead of opening a branch, industry observers said.
“As a matter of policy, we do not respond to market rumours or speculations,” Raymond Vermeulen, head of external communications and media relations at ING Group, told ET in response to its detailed questionnaire.In its edition on January 16, ET reported that Japan’s SBMC and Oaktree Capital are among those to have submitted EoIs for IDBI Bank. Others who are believed to have shown interest include Emirates NBD Bank and Prem Watsa’s Fairfax. A consortium of private equity group CVC and Shriram Group that was seriously evaluating the transaction eventually pulled out of the race.
India Shining
The largest lender in the Netherlands, in an investor note shared on January 10, said India is poised to do better than most of its Asian peers in 2023 as proactive policy puts the country in a good position to benefit from easier conditions during the year.
“India’s lesser reliance on trade with China also provides a buffer, while a rethink on global bond market inclusion for government securities could see substantial capital inflows,” said Robert Carnell, regional head of research, Asia-Pacific, ING.
The bank also expects India to inch up the rankings for top foreign direct investment (FDI) destinations in 2023, even as the external economic outlook gets grimmer and China reopens. “India is increasingly being seen as an alternative destination for investment following policy measures designed to ease FDI inflows and promote the manufacturing industry, as well as investment issues in China (trade wars, tech wars, zero-Covid, etc),” Carnell said. “India is the only economy in Asia to offer the potential for scaleability, which was one of the main attractions of China.”
The long-pending inclusion of Indian bonds on global indices in 2023 would fill a gap left by the exclusion of Russian bonds, ING said. “At stake for India is an estimated $40 billion of capital inflows that will help pay for the current account deficit and support the INR,” it added.
ING Bank had converted its representative office in India into a full-service branch in 1994. In 2002, it merged with Vysya Bank to become ING Vysya. In 2015, ING obtained a stake in Kotak Mahindra Bank through the merger of ING Vysya Bank and Kotak.
In 2017, ING and Kotak signed a cooperation agreement under which ING could serve Kotak’s clients through its network internationally and Kotak, likewise, supported ING clients with their Indian operations. Additionally, ING and Kotak also signed a second agreement to cooperate on cross-border merger and acquisition transactions involving both Kotak and ING corporate finance teams. However, in 2019, ING sold its last tranche of shares in Kotak.
ING operates retail banks in more than a dozen countries but has been struggling with the impact of record low interest rates in recent years. It was hit by mounting bad loans due to the Covid-19 pandemic.
The bank has identified Poland, Romania, Turkey and its Asian investments to have high growth potential. It is also rebooting its international footprint by shutting its wholesale banking operations in Brazil and Kazakhstan. Following a strategic review, ING has also decided to exit its retail banking operations in France and the Philippines.
Strategic Push
The government in October last year invited bids from potential buyers for 60.72% in IDBI Bank. The government and LIC together hold 94.71% in the lender. The successful bidder will have to make an open offer for acquisition of an additional 5.28% of public shareholding in IDBI Bank.
January 7 was the last date for submission of the EoIs. The following day, Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management, tweeted, “Multiple expressions of interest received for the strategic disinvestment of government and LIC stake in IDBI Bank… The transaction will now move to the second stage.” Pandey did not share any names.
There is no guarantee that those submitting EoIs will eventually put up a firm bid. Submission of binding bids does not guarantee a financial bid, cautioned people tracking developments. Financial bids are expected to be invited by March last week.
A more-than-60% jump in IDBI Bank’s share price in the last six months in anticipation of a transaction could turn out to be a deal breaker, according to many banking industry analysts.
