SMBC Bank, Oaktree submit EOIs for IDBI Bank

The government had earlier that the IDBI Bank divestment had been receiving a lot of interest from prospective buyers. Now there are two names that have submitted Expressions of Interest (EOI) for IDBI Bank. The two names are fairly big names in the global banking and investment world viz. Sumitomo Mitsui Banking Corporation Group (SMBC Bank) and Oaktree Capital Management. Both these firms have shown interest in the IDBI Bank stake sale and are keen on a strategic majority stake in IDBI Bank. It is not yet clear whether they intend to bid individually or in consortium with any other party and such clarity should be known in the coming day. Apparently, both have already submitted an expression of interest (EOI) for the strategic sale of IDBI Bank.

The IDBI Bank stake sale is in process and the same is likely to be completed in the next fiscal year. Overall, a total of 60.72% stake will be sold in IDBI Bank to the strategic investors. Out of this 60.72% stake, the government of India will offload 30.48% stake in IDBI Bank while the Life Insurance Corporation (LIC) of India will sell 30.24% in IDBI Bank. Post the acquisition, the buyer will make an open offer for the 5.7% stake held by the public. Once the stake sale is concluded, the government and the LIC will jointly still hold around 34% stake in IDBI Bank and their future course will be decided later. However, the government stake would be declassified as promoter stake, to remove any confusions.

The entire divestment program is going to go through 2 stages. In the first stage, it would only be the expressions of interest or EOI. Then the DIPAM would appoint agencies to do a detailed due diligence of the bidders. In the recent past, there were several cases where the government ended up in an embarrassing situation since enough due diligence was not done on the bidders. The IDBI Bank stake sale would have go through both the stages in a very rigorous manner. That is why the entire process is likely to take more than a year to be completed. The IDBI Bank divestment would also demand a control premium since the buyer would be getting majority control of the company and that is the global norm.

In terms of profile of the two companies, let us begin with SMBC Bank. It was formed by merging two of the largest Japanese banks viz. Sumitomo Bank and Mitsui Bank to create one of the world’s largest banks. SMBC has a global footprint across most of major nations. Oaktree is a global investment manager specializing in alternate investments. Oaktree broadly invests in four categories of assets viz. credit, private equity, listed equities and real assets. Oaktree has AUM of over $163 billion and employs over 1,000 professionals. This global investment manager has a robust international presence across North America, Europe, Asia and Australia.

It has 69 of the top 100 pension funds in the world as its clients and 39 out of the 50 state retirement plans in the US. Apart from these, Oaktree also caters to over 300 endowments globally as well as to over 500 listed corporations and more than 15 sovereign wealth funds (SWFs). In terms of regional AUM mix, 65% comes from the Americas, 18% from Europe and 17% from Asia Pacific. Credit at 71% is their biggest asset class with real assets at 14% and private equity at 11%. Since 2019, Brookfield has been a majority owner of Oaktree. In terms of client mix, public funds, insurances and SWFs account for 46% of AUM.