Rs 53k crore IDBI stake sale with LIC takes government past selloff target

NEW DELHI: Govt and LIC will sell a combined 60.7% in IDBI Bank for Rs 52,878 crore to an arm of Fairfax Financial Holdings, which is controlled by Canadian billionaire Prem Watsa, that will result in the largest-ever financial sector FDI in the country. The transaction will help govt scale the disinvestment and asset monetisation target of Rs 80,000 crore for the current fiscal year.The Centre will sell 30.48% to 10955230 Canada Inc, while LIC will offload 30.24% after the cabinet committee on economic affairs cleared the transaction on Wednesday, five years after the process started and seven months after the earlier bids by Fairfax and Emirates NBD were rejected. Finance minister Nirmala Sitharaman said that the “strategic restructuring” – as opposed to strategic sale – will result in govt retaining a 15% stake. LIC will have 19% of the equity capital, which will have to be diluted to 15% in two years as the life insurer is also the promoter of a housing finance company.

Fairfax gets 2 yrs to decide on CSB stakeAfter signing the share purchase agreement, the Canadian company will have to make an open offer for the 5.3% stake held by the public. Fairfax, which will present its credentials to RBI in the coming weeks, will have to decide on its 40% holding in Catholic Syrian Bank — whether it will sell the shares or merge the bank with IDBI Bank.Over the next 15 years, the Canadian company will be required to pare its stake to 26%. The sale comes with a lock-in period of five years with the Canadian company allowed to retain the brand for three years.Although the decision was announced after the stock market closed, IDBI shares closed 9% higher at Rs 90.44 on BSE. “Having supported the bank’s recovery, we are now enabling its next phase of growth through the infusion of FDI while retaining a minority stake. This will not only strengthen the banking ecosystem but also help banking services surpass global benchmarks. It reinforces that India’s growth story is strong, its economy is resilient, and the government’s commitment to reform is unwavering,” Sitharaman said in a post on X. While strategic sale is part of NDA govt’s policy, before IDBI, there have only been three transactions that went through — Air India (2021-22), Ferro Scrap Nigam (2024) and Indian Medicines Pharmaceuticals Corporation (May 2026).Govt will completely exit the board of the bank after the sale, which was first discussed in 2016, but was put off, before restarting in 2020 with the preliminary information memorandum issued in Oct 2022. From five players, the field narrowed to two, which submitted their bids that were rejected in March as they were below the reserve price of 94.42 a share, influenced by the market price which swung between Rs 42.40 when expression of interest was sought and Rs 108. 12 on Jan 8, before bids were invited. Given the volatility in the narrowly traded scrip, with only 5.3% public holding, govt opted to use relative valuation by the market multiple method. Separately, the asset valuation method was also used.