The Cabinet Committee on Economic Affairs approved the sale of a 60.72% stake in IDBI Bank to Fairfax Financial Holdings for ₹52,878.08 crore on Wednesday. This major disinvestment involves shares from the government and LIC. The winning bid of ₹81 per share beat the fair value, marking a significant financial deal.
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the sale of a 60.72% stake in IDBI Bank to Canada-based Fairfax Financial Holdings’ parent entity, Canada Inc., for ₹52,878.08 crore, marking a major step towards the lender’s strategic disinvestment.
The transaction involves the sale of a 30.48% stake held by the Government of India and a 30.24% stake held by Life Insurance Corporation of India (LIC). Following the transaction, the government will retain a 15% stake in the bank, while LIC will continue to hold 19%.
The winning bid of ₹81 per share was higher than the benchmark fair value of ₹75.99 per share determined by two independent valuation agencies, according to the government’s press note. It is the biggest strategic disinvestment after Air India.
Competitive bidding process
The strategic disinvestment was undertaken through a two-stage competitive bidding process involving expressions of interest, eligibility assessments and the submission of techno-financial bids.
The government issued the Preliminary Information Memorandum inviting expressions of interest on October 7, 2022. Five parties initially submitted expressions of interest, of which four qualified under the prescribed eligibility criteria. Two subsequently submitted techno-financial bids.
Only parties found ‘Fit and Proper’ by the Reserve Bank of India (RBI) and granted security clearance by the Ministry of Home Affairs were eligible to participate in the bidding process.
The CCEA approved the successful bidder following an evaluation by the Core Group of Secretaries on Disinvestment and consideration of recommendations from the Alternative Mechanism, comprising an empowered group of Cabinet ministers.