Cabinet approves sale of 60.72% IDBI Bank stake to Fairfax for ₹52,878 crore; shares slip

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, on Wednesday, 14 October, approved the sale of a 60.72 per cent stake in IDBI Bank to Toronto-based Fairfax Financial Holdings for ₹52,878 crore (about $5.56 billion), according to Business Standard. The winning bid was ₹81 per share.

Once completed, the transaction will be the largest foreign direct investment in India’s financial sector, Business Standard reported. The Federal described it as the country’s biggest strategic disinvestment since the sale of Air India.

Who sells what

• Government: sells 30.48 per cent of its 45.48 per cent holding, keeping 15 per cent
• LIC: sells 30.24 per cent of its 49.24 per cent holding, keeping 19 per cent
• Deal value: ₹52,878 crore at ₹81 per share for 60.72 per cent
• An open offer will give minority shareholders an exit option

According to Business Standard, the government’s residual 15 per cent will be sold in the open market, with an empowered group of ministers headed by Finance Minister Nirmala Sitharaman delegated that authority. LIC must bring its residual stake down to 15 per cent over two years. Fairfax will have to reduce its own holding to 26 per cent over a 15-year timeline to be set with the Reserve Bank of India (RBI).

Regulatory steps and CSB Bank

Fairfax, led by founder and CEO Prem Watsa, must clear the RBI’s “fit and proper” assessment and submit a roadmap for meeting regulatory conditions before completion, Business Standard reported. Fairfax already holds about 40 per cent of CSB Bank through Fairfax India Holdings. Since RBI norms do not allow one entity to own and run two banks, Fairfax will have to exit CSB Bank or merge it with IDBI Bank within two years, the report said.

“The biggest issue will be what happens to CSB Bank and how its relationship with IDBI Bank is resolved,” Ajay Roti of Tax Compass told The Federal, while calling the transaction “largely a done deal” pending approvals.

Earlier bids in FY26 fell short of the then reserve price of ₹94.42 and were rejected. According to Business Standard, the government’s valuation methods gave an average of ₹75.99 per share, and the ₹81 bid was judged reasonable because it exceeded that figure. The government has so far raised ₹55,757 crore from disinvestment this financial year against a combined target of ₹80,000 crore for disinvestment and asset monetisation.

Shares fall on deal price

IDBI Bank shares fell more than 6 per cent in intraday trade on Thursday, 15 October, touching a low of ₹84.51, Business Standard reported. The ₹81 deal price was about 10 per cent below Wednesday’s close and below market expectations of ₹100–110. Reports differ slightly on that close: one Business Standard report put it at ₹89.85 on the NSE, another at ₹90.4.

“So to that effect, the Rs 81 per share price is a disappointment for the markets,” independent market expert Ambareesh Baliga said, according to Business Standard.

Pratik Shah of EY India said the acquisition “is strategically significant because it provides control of a large bank,” according to Business Standard.

Sources: Business Standard, Business Standard, The Federal