Shares of IDBI Bank ended nearly 8 per cent lower on Thursday after rallying sharply in the previous session as the Cabinet cleared Fairfax Financial’s proposal to acquire a 60.72 per cent stake in the lender for about Rs 53,000 crore.
The stock tanked 7.71 per cent to settle at Rs 83.47 on the BSE. During the day, it dropped 8.72 per cent to Rs 82.55. At the NSE, the stock dived 7.67 per cent to end at Rs 83.45. The company’s market valuation eroded by Rs 7,494.43 crore to Rs 89,750.30 crore. On Wednesday, shares of IDBI Bank surged 9 per cent before the announcement, adding Rs 8,086 crore to its market valuation.
Canada’s Fairfax Financial Holdings will acquire a 60.72 per cent stake in IDBI Bank for about Rs 53,000 crore, in what would be the largest foreign investment in an Indian bank and a major milestone in the country’s long-delayed banking privatisation drive.
The Cabinet Committee on Economic Affairs approved Fairfax subsidiary M/s 10955230 Canada Inc as the strategic buyer for the government’s 30.48 per cent stake (for about Rs 26,620 crore) and state-run Life Insurance Corporation of India’s (LIC) 30.24 per cent stake (for about Rs 26,440 crore).
Canadian billionaire Prem Watsa-led Fairfax will pay Rs 81 per share, higher than the benchmark fair value of Rs 75.99 determined by two independent valuation agencies, an official statement said on Wednesday.
The deal - the largest in the banking space - marks a major milestone in a long-delayed effort to privatise IDBI Bank and reduce state ownership of commercial enterprises. The sale process began in 2022 and faced a setback earlier this year when initial bids fell below the government’s reserve price.
The transaction still needs approval from the Reserve Bank of India (RBI), which will conduct a “fit and proper” assessment, as well as the Competition Commission of India (CCI) and other statutory authorities.