NEW DELHI: The sale of govt stake in IDBI Bank will help increase its value, fully protect the interest of employees and directors nominated by the Centre and LIC will exit the board to give the new management a free hand, a top govt official told TOI on Wednesday.Hours after govt nod, Dipam secretary Arunish Chawla also vowed to move ahead with other transactions in the coming months and “not rest on past laurels”. “We still haven’t finished our work. We are further energised by the approval… We will continue to move ahead with the strategic transactions, and we will take Cabinet approvals to their logical conclusions. You will keep hearing from us from time to time,” he said, without commenting on specific companies.

Since 2016, the Union Cabinet has cleared three dozen strategic disinvestments but several of them, including BPCL and Shipping Corporation are no longer being pursued. Chawla dismissed suggestions that govt was not keen on privatisation of PSUs. “We are delivering on what has been approved by the Cabinet and we have completed five strategic sales in the last five years… Govt remains firmly on the track of reforms.”The secretary said the new owners will bring fresh energy and private sector management practices and efficiency to boost IDBI Bank’s performance, while expecting the transaction to be closed before end of the current financial year.“We have spent the last one year discussing with the management, the employee associations, the qualified parties. We’ve brought everyone on board. Even today the service conditions of the IDBI Bank employees is decided by its board. The service conditions of all existing employees will be fully protected, all pensioners of IDBI Bank will be fully protected. There is a special pension fund set aside for this purpose and going forward, the new management will run the bank in consultation with the employees and its associations.“Chawla said a lot of hard work has gone into ensuring that the transaction was cleared. After the setback in March, when the bids were rejected, the core group on disinvestment led by the Cabinet secretary and DIPAM went back to the drawing board. “We relied completely on professional advice. When the stock market price is extremely volatile and the stock is very narrowly traded, it tends to misalign the intrinsic value,” he said.So, govt studied global examples and went for relative valuation by what is called market multiple method or moon charts methodology. The market multiples of comparable entities are used to compute the fair market value. Separately, an asset valuation method was used based on the assets and liabilities.“Because the book value of IDBI Bank was low, the professional agencies converted the asset and liabilities on the books, including financial assets and physical assets like land and buildings, into their fair replacement value. In addition, they valued intangibles like the economic value of the banking licence, customer relationship, which is built on its branch network, the brand value and added all this up to the book value to arrive at the net asset value or the fair value asset value,” Chawla added.Using the average of the two valuations worked out to Rs 75.99 a share, while the winning best bid was Rs 81 a share, resulting in CCEA clearing the Farifax offer.“After six months of hard work and through a collective decision and multi-lauyered decision making process, where everyone’s views were taken on board and professional agencies were allowed to do their job, we have been able to find a way forward… We have stood up to take difficult decisions and that is what is necessary to drive reforms.”