NEW DELHI: A 10-page internal note from the Department of Investment and Public Asset Management (DIPAM), dated August 13, 2026, records that the Centre opened Fairfax Financial’s final offer for IDBI Bank and, on the same day, discarded the existing reserve price and ordered fresh valuations under revised ground rules. The new valuations came in below the offer. The Cabinet approved the sale in October at Rs 81 per share, against a benchmark of Rs 75.99. This was below the Rs 94.42 floor that had applied in the first round.
The note, signed by DIPAM Secretary Arunish Chawla, was prepared for the Core Group of Secretaries on Disinvestment. It recommended the bidder identified as “QIP-3”, which refers to Fairfax’s bid that the Cabinet subsequently approved.
The sequence recorded in the note began on March 12, when first-round bids were opened. Both offers were below the minimum price. The note states that “both bidders refused to match the Reserve Price” after being asked to do so.
The core group met the valuation agencies on April 2 and 27. Fairfax submitted a revised sealed bid on June 1. On July 13, officials opened the bid and ranked it first. At a second meeting that day, the core group decided that the old minimum price “cannot be reused and should be discarded and disregarded”. It then ordered fresh valuations under revised rules.
The valuers submitted their reports on August 13. The note concluded that Fairfax’s offer “appears to be reasonable”.
The note also quotes DIPAM’s Indicative Booklet on Strategic Disinvestment, which states that officials fixing the reserve price “will not have knowledge about the quantum of financial bids quoted by the bidders”. However, the note records a change in this procedure, stating, “This procedure was adopted initially, but the bids were below the reserve price.”
Three changes shaped the revised valuation process, according to the note.
First, market price was set aside as an unreliable indicator. The note cited share-price fluctuations of “almost 100%”, arguing that “the market price [was] unhelpful for valuation purposes”. However, when the share price later fell below the bid, the note recorded that “one view was that the H-1 Bid Offer may be accepted as a fair outcome”.
Second, private sector banks were removed from the list of comparable institutions. The note acknowledged that the Reserve Bank of India had treated IDBI Bank as a private sector bank since 2019, but dismissed this classification as being based on “purely technical reasons”. It argued that including private banks “leads to an over-estimated reserve price”.
Third, the asset valuer was asked to provide “point estimates” instead of scenarios, with the scope of intangible assets narrowed.
KPMG India, the transaction adviser appointed to oversee the sale, prepared the valuation comparing IDBI Bank with public sector banks. BDO Valuation Advisory LLP served as the asset valuer. Following the Cabinet’s decision, the DIPAM Secretary told reporters that two independent valuation advisers had valued the bank.
The government also agreed to indemnify all disputed income tax demands, “whether or not recognized as contingent liabilities in the IDBI accounts”. DIPAM said on October 29 that the potential liability stood at Rs 627 crore, against a bid-price enhancement of Rs 3,917 crore.
In its covering letter accompanying the revised bid, Fairfax described the offer as “our final offer”. It added that if the government sought a rebid or a further enhancement, “we would respectfully withdraw from the process”. The second bidder did not revise its offer, while two of the four parties cleared to participate in the bidding process did not submit bids.
The note also cited the Department of Economic Affairs on the urgency of the sale. It referred to “extraordinary fiscal strain due to the impact of the Middle East Conflict”, including higher fertiliser and LPG costs, excise duty cuts on petrol and diesel, depleted foreign exchange reserves and pressure on the rupee. It argued that the sale would “alleviate fiscal stress”.
The note acknowledged that the General Financial Rules contain no specific provision for the sale of shares. It relied instead on rules governing the disposal of goods and provisions in the Railway Stores Code relating to the auction of scrap.
Responding to questions about the timing and methodology, DIPAM said its internal practices “are in the nature of indicative guidelines and not hidebound rules or regulations”. It cited a 2017 Cabinet decision that allows the core group to consider deviations from established procedures. The department also maintained that the reserve price was “neither decreased, nor increased”, arguing that the first round had become functus officio, or legally spent.
DIPAM said the valuation methodology had been reviewed in April 2026, before best-offer bids were invited, and that the valuers began their work in May. It maintained that the exercise remained double-blind. The department also said there were no comparable transactions and that investors continued to value IDBI as a public sector entity.
The note does not mention Fairfax’s plan to transfer its stakes in Go Digit and IIFL Capital to IDBI Bank. A day after the sale was approved, Fairfax chairman Prem Watsa said those holdings would be moved into the bank “at their respective market prices”.
With inputs from PTI and media reports