New Delhi: The Centre on Thursday clarified the process followed in the strategic restructuring of IDBI Bank Ltd, explaining the two-stage bidding mechanism, the role of the Core Group of Secretaries on Disinvestment (CGD) and the independent valuation exercises undertaken before finalising the best-offer round.
In its clarification, the government said the initial bidding round was conducted during the financial year 2025-26 by the Department of Investment and Public Asset Management (DIPAM) in accordance with its internal indicative guidelines.
These guidelines, it emphasised, were not rigid rules or a legally binding framework and allowed flexibility to ensure that strategic disinvestment transactions were completed effectively and within a reasonable timeframe, according to an official statement.
The government pointed out that there was no pre-determined benchmark for bidding. Bidders were required to independently assess the bank’s value and submit their financial offers confidentially.
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Independent agencies were also engaged to determine the fair value of the enterprise at the relevant time. The valuation was subsequently used as a benchmark to assess whether the bids were reasonable.
As a result, the price discovered through bidding could be either higher or lower than the comparative valuation.
The clarification referred to Clause 5.3.6(iii) of the Request for Proposal, which specifically provides for a situation in which the highest financial bid falls below the reserve price. In such circumstances, the Government of India (GoI) is authorised to decide the further course of action, and qualified interested parties cannot subsequently question that decision.
According to the government, DIPAM’s internal procedures did not prescribe a specific mechanism for handling such a situation. However, the Cabinet Committee on Economic Affairs (CCEA), in its meeting on August 16, 2017, had delegated special powers to the CGD to address procedural difficulties and consider deviations wherever necessary for the effective implementation of strategic disinvestment decisions.
Exercising these delegated powers, the CGD itself determined the procedure for the second round, involving the submission of best offers. The government clarified that the reserve price was neither reduced nor increased. The initial bidding round ceased to have effect after the bids received in that round were not approved.
The entire valuation methodology was reviewed by the CGD in April 2026, before the invitation of best-offer bids. Since the comparative valuation had to reflect the financial position of the bank at the time of bidding, independent valuation agencies began working on revised assessments in May 2026, following the publication of the financial accounts for the year ended March 31, 2026, in late April.
The government described the process as double-blind, with bidders having no access to the independent valuation and the valuation agencies remaining unaware of the financial bids. Only the CGD had access to both sets of information and was responsible for comparing the offers against the fair valuations before taking a decision on their reasonableness.
The valuation exercise involved two independent advisers using separate methodologies. Business valuation was undertaken through the Transaction Adviser, which also engaged professional experts trained in the Market Multiple Method, considering the complex nature of the transaction.
The Market Multiple Method has two approaches: the Comparable Company Method and the Comparable Transaction Method. Since suitable comparable transactions were not available, the valuers adopted the Comparable Company Method, using listed public sector banks as benchmarks.
The clarification also explained the treatment of IDBI Bank’s ownership status. Although the bank was government-owned until 2019, it became government-controlled after the Life Insurance Corporation of India (LIC) acquired a majority stake that year. In the absence of a specific regulatory protocol for this situation, the Reserve Bank of India (RBI) began treating IDBI Bank as a private bank for regulatory purposes. However, its ownership remained overwhelmingly with LIC and the Government of India, while market investors continued to value it as a public sector entity.
The Asset Valuer, meanwhile, adopted established valuation methodologies and included additional value relating to disputed tax demands. This provision was introduced as a common demand of the qualified bidders to encourage higher bid offers.
The government described the potential tax-related liability as a low-probability event and said it would remain revenue-neutral, as reimbursement would be limited to the additional tax demand actually paid, if any.
The potential liability on this account was estimated at Rs 627 crore. Against this, the price discovered through bidding increased by Rs 3,917 crore, enhancing the transaction value for both the central government and LIC.
The clarification also addressed the decision to discard IDBI Bank’s stock price as a valuation benchmark, stating that the reasons, including volatility in the narrowly traded stock, had already been explained in the government’s press note dated October 14, 2026.
The government further said that both the Centre and LIC would retain their residual shareholdings in IDBI Bank, allowing them to benefit from potential future gains arising from value enhancement following the bank’s strategic restructuring.
