IDBI Bank sale: Govt releases FAQs on Fairfax deal, board exit and valuation

The central government on Wednesday approved the long-pending deal to privatise IDBI Bank and reduce state ownership of the commercial lender, with Canada's Fairfax Financial Holdings set to acquire a 60.72% stake in the bank for about ₹53,000 crore ($5.5 billion). The deal, the largest in the banking sector, was described by the Union Cabinet as the 'strategic restructuring' of IDBI Bank.

The government's stake in the bank will fall from 45.5% to 15%, while Life Insurance Corporation of India's (LIC) holding will decline from 49.2% to 19%.

Under the terms of the deal approved by the Union Cabinet, both existing co-promoters will entirely withdraw their nominee directors from the bank’s board of directors.

IDBI Bank, which had been grappling with poor financial health for years, was placed under the Prompt Corrective Action (PCA) framework in 2017. Two years later, LIC infused ₹21,624 crore into the lender in exchange for preferential shares, acquiring a controlling stake in the bank.

This reduced the government's stake to below 51%, prompting the Reserve Bank of India (RBI) to reclassify IDBI Bank as a private-sector bank.

The deal, signed on Wednesday, has prompted multiple queries about India's biggest cross-border bank transaction. The government has sought to address these through a release issued by the Ministry of Finance.

While describing the strategic buyer for IDBI Bank Ltd, the finance ministry said: "M/s 10955230 Canada Inc. (parent entity M/s Fairfax Financial Holdings Ltd.) has been approved as the Strategic Buyer for IDBI Bank Ltd."

How will the proceeds from the sale be divided?

Explaining the split between the central government and LIC, the ministry said that 60.72% of IDBI Bank Ltd's total shareholding was being sold through the transaction, comprising the 30.48% stake held by the Government of India (GoI) and the 30.24% stake held by LIC. The proceeds will be divided in the same proportion.

What impact will it have on the banking sector, economy at large?

The government asserted that the deal would generate positive sentiment around economic reforms.

"The IDBI Bank, post-privatisation, would be able to generate funds without any dependence on government assistance, as has been the experience in the past. It is expected that the strategic buyer will infuse private capital, bring in new technology and better management practices, which will help enhance its business potential and make it more competitive for both credit and deposit growth," the ministry said.

How was IDBI Bank valued for the deal?

The ministry said IDBI Bank's stock price was volatile during the valuation period, fluctuating between ₹61.01 and ₹118.38. It said the stock's limited trading activity made its market price an unreliable indicator of the bank's intrinsic value. Therefore, the ministry used the market multiple method to determine the bank's fair market value, based on the closing accounts of all public sector banks as of 31 March 2026.

The asset valuation for the deal included both tangible and intangible assets, including land and properties, along with liabilities, to determine the enterprise's fair net asset value as of 31 March 2026, based on IDBI Bank's audited accounts.

What is the offer price for IDBI Bank shares?

The acquisition, which has been in the making for over four years, will see Fairfax take control of IDBI Bank in India's biggest cross-border bank deal.

Fairfax will offer ₹81 per share for IDBI Bank, above the benchmark price of ₹75.99 per share determined by the government based on fair valuations, Indian officials said in a statement.

Shares of IDBI Bank closed at ₹90.44 apiece, up 9% on the day. The announcement came after the close of trading.