00:00Let me bring in now S.E. Garg, former Finance and Economic Affairs Secretary.
00:05We'll also be joined by Rajat Sethi, a political analyst who is joining us as well.
00:11Subhash Garg, I'm going to begin with you.
00:13Finance Minister Nirmala Sitaraman has said that IDBI Bank was handed over to the Modi government,
00:19burdened with bad loans linked to politically connected business groups,
00:23and that the NDA government has since turned it around with over 25,000 crore in recapitalization.
00:29Given this turnaround, isn't Rs. 81 per share sale price really a throwaway valuation, as you argue?
00:40See, it's a fact that in 2014, the IDBI Bank was not a very strong bank, like many other public
00:50sector banks as well.
00:52The AQR revealed that in 2018-19, the bank had as much as 27% NPAs.
01:01Then a lot of things happened in the economy, including turnaround of IP through IBC, the steel, power, telecom.
01:11And the government also infused a lot of money in the IDBI Bank to allow it to provide for the
01:18non-performing assets and all.
01:20And as a result, in the last four years, the IDBI Bank has become a very strong bank.
01:28Its free reserves today are higher than what the total price which is being paid by the Fairfax holdings.
01:35And in that context, Rs. 81 is certainly a very, very low price, considering its true worth.
01:44So, I don't think anyone can claim or should claim that the bank has been turned around and therefore we
01:52should be able to, or we are justified to sell it cheap.
01:57Will you respond to that, Rajat Sethi?
01:59Rahul Gandhi has said that the government is selling an institution built for nation building and that privatization threatens employee
02:07reservation rights.
02:09Is this a genuine concern about the public sector employment or perhaps an attempt to turn a commercial transaction into
02:16a political battle?
02:18Well, politicians will make political statements.
02:21That is what their job is.
02:23So, you should not attribute too much of value to that.
02:27Anything that the government do, the opposition, by the very definition, they have to oppose it.
02:32And Gharik sir has been, he was the DEA secretary around the time when we all saw what happened to
02:40IDBI Bank.
02:41It entered into the prompt corrective action because of the NPS.
02:45NPS had gone up to, I believe, 32, 35 percent during that time.
02:49So, things were pretty bad.
02:51It was LIC which took in the controlling stake at that time by injecting around 25,000 crores at that
02:57time in 2019.
02:59And I believe then Gharik sir was the finance secretary.
03:02So, he knew that there was taxpayer money through the LIC route which was literally pumped in in order to
03:12resurrect this whole institution which was ailing because of these NPAs.
03:17So, it's not like the situation has drastically improved.
03:21I mean, things were like limping and it eventually returned to profitability.
03:26And overall, I believe that the government should not be in the business of perpetually owning up vast shares of
03:35institutions like the banks.
03:38Currently, I still believe that 35 odd percentage would still be directly with the government and through the LIC with
03:44the government.
03:45So, I believe privatization of certain extent to allow best practices of international banks to come in.
03:52These are the similar troops that what Mr. Rahul Gandhi has been saying has been largely shunned over the last
03:5820, 30 years.
04:00So, there's no point of politics onto these things.
04:03If there are bidders onto this which can bid at a bigger price, at a better price, it's a listed
04:09stock.
04:09There are provisions and all of those things can be taken care of through the legitimate ways instead of making
04:17everything as a political brownie point.
04:18So, Subhashgarh, you know, why are you calling IDBI bank sale a crony transaction?
04:28See, I'm entirely for the privatization of the public sector banks.
04:34And as Rajat says, that I was instrumental in putting it into private domain, at least technically, by selling 51
04:44percent share to LIC at 61 rupees in 2018-19.
04:50And therefore, privatization decision is not what I'm questioning.
04:56What I find more sort of problematic is that this is not a genuine competition in this entire exercise.
05:05You started with five, then it became four who were qualified.
05:10Then somebody of as serious eminence as Uday Kotak group decided not to bid.
05:20I think the alarm bell should have been set at that time that why is the serious bidder from the
05:26domestic market not actually bidding?
05:29And then you see that the two bidders did not file their bid and when two bidders did not file
05:37their bid and the bid of the two was opened, it was much less than the reserve price which the
05:44government had fixed on.
05:46I have never seen a transaction in my public life, and I think one can do the check if required,
05:55when reserve price has been opened and the bids have been found to be lower than that.
06:01And then you, instead of cancelling the bids, you go on revising the reserve price.
06:07This is unprecedented.
06:09This is, this is literally, so you have reduced the stake sale to one horse race.
06:17The other guy who bid in the first instance did not bid in the second instance because they had acquired
06:24another Indian bank, which is perfectly fine.
06:27The RBL bank was acquired by the eminence NDB.
06:31So, if you reduce the privatization to a one horse race and you revise the reserve price, which is, in
06:40my judgment, much lower than the genuine price, you have 9,000 crores profit per annum now, and the price
06:48which is getting for 60% or 61% shares is hardly 4 or 5 times of that.
06:54So, you, as I said earlier, it is the, the free reserves are much larger than the total price which
07:01is getting.
07:01Okay.
07:02So, all transaction reeks of…
07:06Rajat Sethi, you wanted to come in.
07:08You are, you are, you want to give it to one particular party at whatever cost you or whatever price
07:14you can…
07:15So, here is S.E. Gerg of the opinion that the entire process was tilted in favor of one company,
07:21Fairfaxia.
07:24I mean, who stops Gerg, sir, to actually put together a consortium of buyers and go out and bid it,
07:29bid against Fairfax?
07:31See, we, at each time, we attribute a malafide intent before knowing the details.
07:38I mean, if today the finance secretary or whosoever is there, tomorrow he will quit that chair, come out and
07:42start criticizing all the decisions and everything.
07:44You very well know it's not as simple as it is made out to be.
07:48We all understand that the initial reserve price of around 94 rupees, if I'm not mistaken, what happened to that?
07:55If somebody could have come about on that reserve price, he or she, that entity could have easily got the
08:03required stake.
08:03There had to be sweetening of the deal through some tax indemnity package that was associated with this entire transaction
08:10in order to force Fairfax to increase the share price overall
08:15and reach from initial 75 rupees per share to 81 rupees per share.
08:19So, see, it's very easy to attribute doubts over every decision.
08:24But then, if you are doubting something, then you need to have very hard evidence.
08:27You cannot say that it hasn't happened, it is appearing to be something malafide, wherein there were independent institutions which
08:37were involved in arriving at the valuation method,
08:41the assets were valued, market multiples were also deployed, various strategies were deployed.
08:46And then, on top of that, government put in high amount of premium in order to arrive at this number
08:52of 90 rupees to 94 rupees per share.
08:54Was that justified? I mean, eventually, whether the price is justified or not, that market forces have to determine.
09:00And what we need to see is that if any party who was interested did not get the right opportunity
09:07to bid and bid against Fairfax,
09:10then you can call that this entire process has been favoured or structured in order to favour one entity.
09:17But where are the other parties? Where are the other entities who are trying to crib about this whole bidding
09:22process?
09:22That's my problem. In vacuum, you cannot go out and criticise government's position on everything that they do,
09:30and especially from bureaucrats, because when they are on the chair, they go through the very same exercise.
09:35And when they are off the chair, they come out and criticise every decision as if they have some greater
09:41right over calling out everything,
09:43just because they have some apparent understanding of the government process.
09:46So, my request very respectfully to Gurk, sir, is, sir, please lay out.
09:50If you, maybe you have certain insider information, please lay it there, so that we lesser mortals can understand what
09:57exactly happened.
09:58Because at the surface of it, I don't see anybody was free. Why did they not bid?
10:03And what was the government's initial thought process when the valuation itself was increased to Rs.94 and the premium
10:10was added?
10:13Rajat, we have really come to the end of this discussion.
10:16Perhaps you can take this conversation off air with S.E. Garg.
10:19Thank you so much for joining us, S.E. Garg and Rajat Sethi.
10:22Thank you so much for joining us today.
