The Department of Investment and Public Asset Management (DIPAM) has invited bids from merchant bankers to assist in the stake sale of public sector banks (PSBs) and listed financial institutions. The initiative aligns with the government’s ongoing efforts to dilute equity in select state-owned banks and financial entities through structured transactions.
Merchant Banker Empanelment for Stake Sale
As per the Request for Proposal (RFP) floated by DIPAM, the merchant bankers will be empanelled for a three-year period, with the option of a one-year extension. They will be responsible for advising the government on transaction timing, structuring deals, and ensuring regulatory compliance under SEBI, RBI, and IRDAI guidelines.
The last date for submitting bids is March 27, 2024.
Merchant bankers can apply under two categories based on their capacity to handle capital market transactions:
- ‘A+’ category for transaction sizes of ₹2,500 crore or more
- ‘A’ category for transaction sizes below ₹2,500 crore
DIPAM may select one or more merchant bankers for each specific transaction, depending on the scale and requirements.
Scope of Work for Merchant Bankers
The selected merchant bankers will be responsible for conducting market research, organizing roadshows, and facilitating investor outreach to attract potential buyers. Their tasks include:
- Conducting market surveys to assess investor interest
- Arranging meetings with institutional investors and high-net-worth individuals (HNIs)
- Developing marketing strategies to highlight the entity’s growth potential
- Engaging with domestic and international investors to drive successful equity dilution
While merchant bankers will bear all marketing and promotional expenses, the government will cover travel and accommodation costs for officials involved in the transactions.
Also read: IIM Study: Green Lending Boosts Bank Stability
Privatisation Plans in Line with Budget Announcements
The government’s plan to privatize two public sector banks and IDBI Bank was first announced by Finance Minister Nirmala Sitharaman in the 2021-22 Union Budget. The latest move to empanel merchant bankers is seen as a step toward executing strategic disinvestments in the banking and financial sector.
With an increasing focus on unlocking capital through stake sales, this initiative is expected to enhance efficiency in public sector banking and attract new investments into India’s financial sector.
