Government to sell its stake in IDBI Bank: Canadian firm to acquire 60.72% of shares; marks the government’s largest disinvestment since Air India

The Union Cabinet has approved the new buyer for IDBI Bank. Under this decision, the Central Government and LIC will collectively sell their 60.72% stake in the bank to ‘Fairfax,’ a company owned by Canadian billionaire Prem Watsa.

The deal has been finalized at ₹52,877 crore. Following the sale of Air India to the Tata Group in 2022, this stands as the Central Government’s largest disinvestment to date. In terms of value, it is nearly three times larger than the ₹18,000 crore Air India deal.

Government and LIC to retain a 34% stake

Even after the sale, the government will retain a 15% stake, and LIC will hold a 19% stake in IDBI Bank—maintaining a combined holding of 34%.

Stake in IDBI Bank

Bid exceeded estimates by ₹5 per share, leading to approval

To determine the fair value of an IDBI Bank share, the government engaged two independent agencies. Based on their calculations, the fair value was determined to be ₹75.99 per share.

The Canadian firm, Fairfax, submitted a bid of ₹81 per share—higher than the base price established by the government. As Fairfax’s bid was ₹5.01 per share above the government’s estimate, it was accepted.

The process for the sale of IDBI Bank was conducted in two phases

The process began on October 7, 2022, when the government invited applications from parties interested in acquiring the bank.

Initially, five major companies expressed interest. After the government reviewed the documentation and compliance with regulations, only four companies were found to be eligible.

Subsequently, in the final round, two companies submitted their technical documentation and bids. A Canadian company secured the deal by placing the most competitive bid.

Answers to two key questions regarding the deal:

Question 1: Who is Fairfax Financial?

Answer: Fairfax Financial is a Canada-based financial holding company. It is headed by Prem Watsa, a Canadian billionaire of Indian origin, who is often referred to as the “Warren Buffett of Canada.”

Question 2: How will this affect general customers and account holders?

Answer: There will be no adverse impact on the bank’s day-to-day operations or on services such as fixed deposits (FDs), loans, passbooks, and digital banking. Your existing FDs, loans, bank passbooks, and mobile or net banking services will continue to function exactly as they did before.

With the arrival of a new owner, more capital will be infused into the bank, which will enable the introduction of new technology and improved banking services for customers in the future.