Fairfax Wins Approval for IDBI Bank Stake

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, has approved 10955230 Canada Inc., a subsidiary of Fairfax Financial Holdings, as the strategic buyer for a 60.72% stake in IDBI Bank Ltd. The transaction has a purchase consideration of approximately ₹52,878 crore, according to the Press Information Bureau.

The proposed acquisition covers a 30.48% equity stake held by the Government of India and a 30.24% stake held by Life Insurance Corporation of India (LIC). Following the transaction, the government would retain a 15% stake in the bank, while LIC would retain 19%.

The winning bid was ₹81 per share, exceeding the benchmark price of ₹75.99 per share established through independent valuation exercises. The government said the valuation drew on two methods: market-multiple-based relative valuation using the financial results of public sector banks and an asset valuation method that considered tangible and intangible assets as well as liabilities.

The strategic sale follows a competitive bidding process that began with an invitation for expressions of interest in October 2022. Five parties initially expressed interest, four qualified under the prescribed criteria, and two ultimately submitted technical and financial bids.

The government said the transaction was evaluated through a multi-stage process involving the Inter-Ministerial Group, the Core Group of Secretaries on Disinvestment and the Alternative Mechanism. Earlier bids were not approved after falling short of the reserve price, prompting the government to invite fresh best offers from qualified bidders.

IDBI Bank has a history of financial stress. The Reserve Bank of India placed the bank under the Prompt Corrective Action framework in May 2017 because of non-performing assets and losses. Restrictions were lifted in March 2021 following improvements in the bank's financial position, subject to conditions and continued monitoring.

The successful bidder must still present its credentials to the Reserve Bank of India for a fit-and-proper assessment and submit a roadmap for meeting the applicable regulatory conditions. The approval therefore marks a major step in the strategic sale, but the transfer of the stake is not yet complete.

The government said the transaction, once completed, would represent the largest foreign direct investment in India's financial sector to date. The CCEA has also authorised a mechanism to undertake a possible sale of the government's remaining 15% stake through the open market, in accordance with the applicable procedure.