The United Forum of IDBI Officers and Employees has formally urged the Chairperson and members of Parliament’s Standing Committee on Finance to thoroughly examine the valuation methodology being adopted for the proposed divestment of IDBI Bank (NSE: IDBI).
In its representation, the Forum stated that IDBI Bank is not merely a quoted equity security. A strategic acquirer will obtain control over an established banking license, a nationwide branch network, a significant deposit franchise, millions of customer relationships, technology infrastructure, trained manpower, institutional relationships, brand goodwill, and substantial immovable property accumulated over more than six decades.
The Forum emphasized that many of these properties—including office buildings, residential premises, training establishments, and land parcels—may have been acquired decades ago at historical costs. Consequently, their current commercial value in metropolitan and prime urban locations could be substantially higher than their book value. Without a detailed examination, the Forum warned of a serious risk that a bidder could acquire both a profitable bank and a valuable real estate portfolio, the latent value of which might subsequently be unlocked privately.
According to the representation, once private control passes to a strategic investor, properties regarded as operationally surplus could be sold, leased, redeveloped, or otherwise monetised. If current market values run into thousands of crores, subsequent monetisation could enable an acquirer to recover a substantial proportion of the acquisition cost from assets accumulated during public ownership.
The Forum has recommended that the Committee examine whether the transaction valuation adequately captures market value, book value, replacement value, franchise value, strategic value, embedded property value, and long-term public development value. It has also called for checks on whether independent asset valuers have been appointed and if the proposed Share Purchase Agreement provides binding safeguards regarding the disposal of significant legacy properties, monetisation proceeds, related-party transactions, and dividend distribution following major asset sales.
Furthermore, the Forum suggested that the Committee examine whether any significant IDBI properties were historically obtained through compulsory acquisition or concessional allotment based on government ownership, public purpose, development-finance functions, or institutional status. While clarifying that it does not suggest every such property automatically reverts upon privatisation, the Forum stressed that a property-by-property legal audit is essential before transferring controlling ownership to understand acquisition statutes, original public purposes, grant conditions, reversion clauses, and change-of-control restrictions.
"Divestments of legacy public sector institutions involve complex underlying assets that go far beyond standard market capitalization. When evaluating strategic sales of organizations with decades of history, scrutinizing immovable property, franchise value, and historical acquisition terms is vital to ensuring transparent and fair public value realization. A comprehensive asset audit protects public interest while establishing clear operational boundaries for future private ownership." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
