October 15th 2023.
The government recently informed prospective asset valuers of IDBI Bank that the lender has deferred tax assets of Rs 11,520 crore and 120 properties in the top seven cities including Mumbai, Pune, and Chennai. These properties comprise nearly 94 per cent of the total written down value of the bank's fixed assets.
In response to pre-bid queries from asset valuers, the Department of Investment and Public Asset Management (DIPAM) said that the bank has 68 properties in Mumbai, 20 in Pune, nine in Chennai, seven in Ahmedabad, six in Kolkata, and five each in Delhi and Hyderabad. DIPAM also stated that the asset valuer should identify intangibles not on the IDBI Bank balance sheet, such as brand name and branch network, and value them.
The Terms of Reference for asset valuers outlined the need for the listing and description of all assets and properties being valued, which includes intangibles such as trademark and title to property rights. Furthermore, the valuation of intangibles must be indicated separately.
The government and LIC are together selling nearly 61 per cent stake in IDBI Bank and have received multiple Expressions of Interest for the same. As part of the sale process, an asset valuer is being scouted for the purpose of conducting the valuation of assets of IDBI Bank for its strategic sale. The last date for submitting bids by asset valuer is October 30.
The asset valuer will be required to value IDBI Bank's investments, loans & advances, fixed assets, and other assets. They will also have to ascertain the fair value of assets as well as liabilities of IDBI Bank. Assets of subsidiaries/ associates of IDBI Bank are not envisaged to be valued individually, but the asset valuer is required to value the investments of IDBI Bank in such subsidiaries/ associates based on acceptable valuation standards.
At present, the government and RBI are in the process of vetting the bids received. Security clearance from the government and 'fit and proper' clearance from the RBI would be necessary for the bidders to move to the second stage of bidding process. Investors who have put in Expressions of Interest have already submitted the required information to secure fit and proper and security clearance.
Pursuant to the transaction, the government will own a 15 per cent stake and LIC 19 per cent in IDBI Bank, taking their total holding to 34 per cent. The asset valuer must ensure that this stake is accurately determined.
The assignment of an asset valuer is a key part of the sale process for IDBI Bank, as it will shape the amount of money the government and LIC get for their stake in the bank. As such, it is important that reliable and accurate valuation of the assets is conducted.
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