Government Approves Strategic Restructuring of IDBI Bank Ltd.
The Cabinet Committee on Economic Affairs (CCEA) has approved the strategic sale of 60.72% equity stake in IDBI Bank Ltd. to M/s 10955230 Canada Inc., the parent entity of M/s Fairfax Financial Holdings Ltd., for a total consideration of ₹52,878.0806181 crores. This transaction represents the largest foreign direct investment in India's financial sector to date.
The strategic restructuring follows IDBI Bank's history of poor financial health that required repeated capital infusions from the Government of India and later from LIC. The Reserve Bank of India had placed the bank under the Prompt Corrective Action Framework on 5th May 2017 due to non-performing assets and losses, but restrictions were lifted on 10th March 2021 subject to certain conditions after financial improvement.
The transaction structure involves the Government of India selling 30.48% of its shareholding and LIC selling 30.24% of its shareholding, leaving residual stakes of 15% with the Government and 19% with LIC. The CCEA has delegated powers to the Alternative Mechanism to undertake minority stake sales of the government's residual 15% shareholding through open market operations.
The selection process involved a two-stage competitive bidding process with multi-layered decision-making through an Inter-Ministerial Group, Core Group of Secretaries on Disinvestment, and an Alternative Mechanism of empowered Cabinet Ministers. From five initial expressions of interest, four parties qualified per eligibility criteria, and two finally submitted techno-financial bids.
Valuation was conducted using two independent methodologies: Relative Valuation by Market Multiple Method based on 31st March 2026 closing accounts of all public sector banks, and Asset Valuation Method considering both tangible and intangible assets including land and properties. The average fair valuation was ₹75.99 per share, serving as the benchmark. The winning bid of ₹81 per share exceeded this benchmark and both independent valuation agencies' estimates.
The successful bidder must now present credentials to the Reserve Bank of India in accordance with Fit and Proper Assessment conducted at the Expression of Interest stage and submit a roadmap for compliance with regulatory conditions. LIC will manage its residual shareholding in accordance with internal procedures while ensuring regulatory compliance.