The Cabinet Committee on Economic Affairs (CCEA) has approved 10955230 Canada Inc., the parent entity of Fairfax Financial Holdings Ltd., as the strategic buyer for a 60.72% stake in IDBI Bank Ltd for a consideration of Rs 52,878.08 crore.
The proposed transaction involves the sale of a 30.48% 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 will retain a 15% shareholding in the bank, while LIC will continue to hold 19%.
Background and Bidding Process
IDBI Bank had faced financial difficulties in the past, requiring capital support from the government and subsequently from LIC. In May 2017, the Reserve Bank of India (RBI) placed the bank under the Prompt Corrective Action (PCA) framework due to its non-performing assets and losses. The restrictions were lifted in March 2021, subject to certain conditions and continued monitoring.
The strategic disinvestment process was initiated following CCEA approval and involved a two-stage competitive bidding mechanism, supported by the Inter-Ministerial Group, the Core Group of Secretaries on Disinvestment and an empowered group of Cabinet ministers.
The Preliminary Information Memorandum inviting expressions of interest was issued on October 7, 2022. Of the five parties that initially submitted expressions of interest, four met the eligibility criteria, while two ultimately submitted technical and financial bids.
Valuation and Bid Assessment
The initial bids, invited in FY26, were not approved as they fell below the reserve price of Rs 94.42 per share. Subsequently, qualified bidders were invited to submit their best offers in FY27 to improve the transaction value.
Given the volatility of IDBI Bank's relatively thinly traded shares, the government relied on independent valuation methods rather than market prices alone. These included the market multiple method, based on the financial performance of public sector banks as of March 31, 2026, and the asset valuation method, which assessed the bank's tangible and intangible assets alongside its liabilities.
The average valuation determined by two independent professional agencies stood at Rs 75.99 per share. The successful bid of Rs 81 per share exceeded this benchmark and the fair value estimates provided by both agencies, leading to its approval.
Next Steps and Government Stake
The successful bidder will be required to undergo the RBI's fit-and-proper assessment and submit a roadmap for complying with applicable regulatory conditions. According to the government, the completed transaction would represent the largest foreign direct investment (FDI) in India's financial sector to date.
The CCEA has also authorised the Alternative Mechanism to undertake the sale of the government's residual 15% stake through the open market in accordance with the prescribed standard operating procedure. LIC will independently manage its remaining 19% holding, subject to regulatory requirements.