In a far-reaching decision to privatise public sector banks, the Government on Wednesday approved the sale of a 60.72 per cent stake in the Industrial Bank of India (IDBI) to Canada-based Fairfax Financial Holdings, owned by V Prem Watsa, for `52,878 crore. It is the country’s biggest strategic disinvestment since the sale of Air India. Once completed, it will be the largest Foreign Direct Investment (FDI) in the financial sector so far.
This decision by the Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, ends a process that has stretched over five years and marks a significant step in the Government’s efforts to reduce its ownership of State-run assets and attract private capital into the financial sector. Prem Watsa-led Fairfax will pay `81 per share, above the benchmark fair value of `75.99 set by two independent valuation agencies, an official statement said.
The deal 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. IDBI Bank shares rose 9.07 per cent on Wednesday to close at `90.44 per share on BSE after the announcement. Finance Minister Nirmala Sitharaman said the approval will pave the way for attracting FDI, while the Government retains a minority stake in the lender.
“Propelled by Hon’ble Prime Minister Shri @narendramodi’s visionary leadership, India’s reform trajectory reaches another milestone today with the CCEA’s approval of IDBI Bank’s strategic restructuring,” she said. The move will strengthen India’s banking ecosystem and help banking services meet global benchmarks, she said.
Sitharaman said the decision reflects the Indian economy’s resilience and the Government’s continued commitment to reforms.
IDBI Bank goes to Fairfax in `52,878 crore mega deal
The strategic restructuring is part of efforts to build a future-ready financial sector that empowers customers, supports entrepreneurs and contributes to the vision of Viksit Bharat, she added.
Briefing media on the decision, Information and Broadcasting Minister Ashwini Vaishnaw said the Government and the Life Insurance Corporation of India (LIC) will together hold a 34 per cent stake in the restructured entity.
The proposed sale of a combined 60.72 per cent stake held by the Government and the LIC would transfer control of the lender to Fairfax, subject to the completion of the transaction and requisite regulatory approvals.
“The CCEA...approved M/s 10955230 Canada Inc (parent entity M/s Fairfax Financial Holdings Ltd) as the strategic buyer for this transaction for a purchase consideration of `52,877.07 crore for the acquisition of 60.72 per cent stake in IDBI Bank, comprising 30.48 per cent equity held by the GoI and 30.24 per cent by the LIC,” the statement said.
Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said the deal will be completed before the end of the current fiscal year.
Fairfax will also have to make an open offer to the minority shareholders. Fairfax, which holds a stake in CSB, must either merge it with IDBI Bank or exit the holding within two years.
IDBI Bank Ltd is a scheduled commercial bank regulated by the Reserve Bank of India (RBI). Due to its poor financial health, the Bank required repeated infusion of capital, initially provided by the Government of India and later by the LIC.
On 5th May, 2017, the Reserve Bank of India (RBI) put the IDBI Bank under the Prompt Corrective Action Framework and imposed several restrictions in view of its non-performing assets and losses incurred by the Bank, an official statement said.
After considering the improvement in the Bank’s financial health, the RBI later, vide its letter dated 10th March, 2021, lifted the restrictions imposed on the IDBI Bank subject to certain conditions and continuous monitoring.
Against this backdrop, the Cabinet Committee on Economic Affairs (CCEA) approved the strategic restructuring of IDBI Bank Ltd. In compliance thereof, it was decided that an aggregate 60.72% of the equity stake in the IDBI Bank Ltd. be sold to a Strategic Buyer, of which the GoI share would be 30.48%. The LIC share would be 30.24%, leaving a residual shareholding of 15% with the Government of India and 19% with the LIC.
The decision of the CCEA was implemented through a two-stage, competitive bidding process supported by a multi-layered, collective decision-making mechanism consisting of the Inter-Ministerial Group (IMG), the Core Group of Secretaries on Disinvestment (CGD) and the Alternative Mechanism (AM) consisting of an empowered Group of Cabinet Ministers.
The Preliminary Information Memorandum (PIM), inviting Expressions of Interest (EoI) from all interested parties, was issued on 07.10.2022. Only parties found ‘Fit and Proper’ by the RBI. They granted security clearance by the Ministry of Home Affairs could participate in the bidding stage, for which the RBI issued a Request for Proposal inviting technical and financial bids from the Qualified Interested Parties (QIPs).
Of the five parties that initially submitted their expression of interest, four qualified as per the eligibility criteria and disqualification conditions prescribed therein; of these, two finally submitted their techno-financial bids. They became Qualified Bidders (QBs) for this transaction.
After comprehensive evaluation by the CGD and after considering the recommendations of the Alternative Mechanism, the Cabinet Committee on Economic Affairs (CCEA) in its meeting held on 14/10/2026 approved M/s 10955230 Canada Inc. (parent entity M/s Fairfax Financial Holdings Ltd.) as the Strategic Buyer for this transaction for a purchase consideration of `52,878.0806181 crores.
In such transactions, there is no a priori benchmark for bidding. The bidders do their own valuation and submit their bids in sealed envelopes confidentially. Independent agencies are hired to conduct a fair valuation of the enterprise contemporaneously, which is then used as a comparator to assess the reasonableness of the submitted bids.
Under this transaction, the company invited initial bids in the financial year 2025-26. For comparison, a reserve price of `94.42 per share was fixed at that time, which was directly and indirectly influenced by the impacted market price.
The unimpacted counterfactual was not visible at that time, except that the unexpected pre-EoI price of the IDBI stock was Rs 42.40 per share on the last trading day before the issue of the PIM/EoI on 7.10.2022.
In contrast, the impacted price was Rs 108.12 per share on the last trading day before the invitation of initial bids on 8.01.2026. The initial bids fell short of the reserve price arrived at that time and were not approved. When it became known that the initial bids failed, the stock market price of the impacted stock corrected and fell significantly below the discovered bid price of Rs 75 per share.
Subsequently, exercising the powers delegated and conferred upon the collective decision-making mechanism, and to enhance the value of the transaction as far as possible, the company invited sealed bids reflecting the best offers from qualified bidders in the financial year 2026-27. The stock price of the IDBI Stock was Rs 70.38 per share on the trading day before the invitation of best offer bids on 18.05.2026.
The stock market price of the narrowly traded IDBI stock remained volatile. It fluctuated both above and below the bid-discovered price, with a high-low range of Rs 118.38 to Rs 61.01 per share over the valuation period.
The stock market price was consequently disregarded, as it tended to misalign valuation with the intrinsic value of the enterprise. Instead, Relative Valuation by the Market Multiple Method, which overcomes this problem, was used to determine the fair market value of the enterprise based on the 31st March, 2026 closing accounts of all public sector banks.
Additionally, the Asset Valuation Method, which considers both tangible and intangible assets, including land and properties along with the liabilities, was used to determine the fair net asset value of the enterprise as per the 31st March, 2026 audited accounts of the IDBI Bank Ltd.
Accordingly, two professional valuation agencies carried out the fair valuation of the enterprise using two independent methodologies, as explained above. The average of these fair valuations was Rs 75.99 per share, which served as the benchmark price for the evaluation of the qualified bids. Since the winning best offer bid of Rs 81 per share was above the benchmark price, as well as the fair value estimates of both the independent valuation agencies, it was adjudged to be reasonable and approved.
The successful bidder must present its credentials to the Reserve Bank of India, in accordance with the Fit and Proper Assessment conducted at the EoI stage, and submit its roadmap for complying with the regulatory conditions prescribed therein.