India’s Cabinet Committee on Economic Affairs approved Fairfax Financial Holdings’ Canadian subsidiary as the strategic buyer of a 60.72% stake in IDBI Bank. The cash transaction values the stake at ₹528.78 billion. India’s government will sell 30.48% and Life Insurance Corporation of India will sell 30.24%. Completion remains subject to Reserve Bank of India approval and other required clearances.
Fairfax offered ₹81 for each IDBI Bank share, above the government’s benchmark value of ₹75.99. The government and LIC will retain a combined 34% stake after the sale. IDBI Bank shares closed 9% higher at ₹90.44 on Wednesday, Reuters reported. The transaction advances a privatisation process announced in 2021, with expressions of interest invited in 2022.
TRANSACTION TERMS AND CONTROL
Five interested parties submitted expressions of interest and four qualified for the next stage, according to the government. Two binding financial bids were received. Independent advisers established the reference value using market-multiple and asset-valuation methods before the winning bid was selected.
Fairfax will gain management control if the transaction completes, while IDBI Bank will retain its name. The buyer’s invested capital is subject to a three-year lock-in under the sale terms. Fairfax must also make an open offer to public shareholders under Indian takeover rules.
NEXT STEPS FOR COMPLETION
The government expects to sign a share purchase agreement before the end of 2026 and complete the sale before the end of India’s financial year, the Financial Express reported. Fairfax will need to secure the remaining regulatory approvals and satisfy the agreement’s closing conditions. It must also merge or exit its investment in CSB Bank within two years, addressing overlapping bank ownership.
IDBI Bank reported ₹4.44 trillion of assets at the end of June and operates more than 2,000 branches, according to Reuters. Its gross non-performing loan ratio was 2.3%, down from almost 32% in September 2018. The next milestones are execution of the share purchase agreement, the public open offer and final regulatory clearance. Any delay or alteration to those steps would affect the expected closing timetable.