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., a subsidiary of M/s Fairfax Financial Holdings Ltd., for a total consideration of ₹52,878.0806181 crores. This transaction represents the largest FDI in India's financial sector to date.
Transaction Structure and Process
The stake sale comprises 30.48% equity shareholding held by the Government of India and 30.24% held by LIC, leaving residual shareholdings of 15% with GoI and 19% with LIC. The transaction was executed through a two-stage competitive bidding process involving an Inter-Ministerial Group, Core Group of Secretaries on Disinvestment, and an Alternative Mechanism of empowered Cabinet Ministers.
Bidding and Valuation Process
After issuing the Preliminary Information Memorandum on October 7, 2022, five parties initially submitted expressions of interest, with four qualifying based on RBI fit-and-proper assessment and MHA security clearance. Ultimately, two qualified bidders submitted techno-financial bids. The initial bids in FY 2025-26 fell short of the reserve price of ₹94.42 per share, leading to a market correction. Subsequently, best offer bids were invited in FY 2026-27 when the stock price was ₹70.38 per share.
Valuation was conducted using two independent methodologies: Relative Valuation by Market Multiple Method based on March 31, 2026 closing accounts of all public sector banks, and Asset Valuation Method considering tangible and intangible assets per IDBI Bank's audited accounts. The average fair valuation was established at ₹75.99 per share, with the winning bid of ₹81 per share exceeding this benchmark and both independent valuations.
Regulatory Compliance and Future Steps
The successful bidder must present credentials to the Reserve Bank of India in accordance with the Fit and Proper Assessment conducted at the EoI stage and submit a roadmap for compliance with regulatory conditions. The CCEA has delegated powers to the Alternative Mechanism to undertake minority stake sales of the GoI's residual 15% shareholding through open market operations, while LIC will manage its residual stake in compliance with regulatory directions.
Historical Context
IDBI Bank had been under RBI's Prompt Corrective Action Framework since May 5, 2017, due to poor financial health, non-performing assets, and losses, requiring repeated capital infusions from GoI and LIC. Restrictions were lifted on March 10, 2021, subject to conditions and continuous monitoring, leading to this strategic restructuring initiative.