Shares of IDBI Bank fell more than 7% on Thursday after the Indian government announced the sale of a majority stake to Fairfax Financial Holdings for over 529 billion rupees ($5.5 billion), CNBC reported.
Fairfax's winning bid was 81 rupees per share for a 60.7% stake. IDBI shares had closed on Wednesday at 90.39 rupees, above the bid price. During the bidding process, the government arrived at an average fair value of 75.99 rupees per share.
The Finance Ministry said in a release on Wednesday that, once final approvals are in place, the deal will be the largest foreign direct investment transaction in India's financial sector. Fairfax must first undergo a fit and proper assessment by the Reserve Bank of India.
Finance Minister Nirmala Sitharaman said in a post on X on Wednesday: "Having supported the bank's recovery, we are now enabling its next phase of growth through the infusion of Foreign Direct Investment while retaining a minority stake."
The ministry said IDBI Bank's poor financial health required repeated capital infusions, and that after a brief recovery the government decided to sell a 60.7% stake to a "Strategic Buyer".
In August the government raised $3.3 billion by selling a 6.5% stake in Life Insurance Corporation of India. According to CNBC, it has been divesting stakes in several state-owned companies this year amid fiscal pressures.
Related: India Approved Fairfax’s ₹528.78 Billion Purchase of Majority IDBI Bank Stake