Fairfax to buy government’s IDBI Bank stake in $5.5 billion deal

CANADA: Fairfax Holdings has finally sealed the deal. After months of haggling, the government has picked the Canadian firm to buy its stake in IDBI Bank, following a sweetened offer that pushed the price to Rs 81 a share, up from Rs 75 last year, according to people aware of the matter. The call was made on Tuesday after meetings at the finance ministry.

At that price, the government stands to pocket around Rs 26,620 crore by offloading a 30.48 per cent stake out of the 45.48 per cent it holds. Life Insurance Corporation, which owns just under 50 per cent of the bank, is selling 30.24 per cent alongside it, taking the combined haul to roughly Rs 53,000 crore, or $5.5 billion, the largest foreign investment ever made in an Indian bank.

Prem Watsa’s Fairfax will now have to launch a mandatory open offer to public shareholders, on top of clearing a thicket of regulatory approvals. “After much discussion, the government and Fairfax have agreed to shake hands and the official announcement could be made anytime now,” one person said. An empowered group of ministers, including finance minister Nirmala Sitharaman, has already been briefed on the revised bids, with a formal notification, letter of intent and share-purchase agreement expected to follow in quick succession.

IDBI Bank, asked directly by the BSE, said it was “not in a position to either confirm or deny” the report. Fairfax did not respond to a request for comment. Shares of the bank closed at Rs 86.54 on the NSE on Tuesday, up 2.9 per cent, and have now rallied nearly 42 per cent since hitting a 52-week low of Rs 61.01 on 31st March, when the government suspended the sale after bids fell short of the reserve price.

The finish line is not quite in sight yet. The winning bidder must clear the Reserve Bank of India’s “fit and proper” test, along with sign-off from other statutory and regulatory bodies, including the Competition Commission of India. Fairfax’s Indian arm already holds 40 per cent of CSB Bank, meaning the promoters will eventually have to merge the two lenders, though the RBI may grant some breathing room on timing.

The deal eclipses the previous record for foreign investment in an Indian bank, Emirates NBD’s $2.75 billion purchase of a 60 per cent stake in RBL Bank in 2025. Emirates NBD had also chased IDBI Bank alongside Fairfax back in February, before the process was shelved in March when bids undershot a confidential reserve price.

IDBI Bank was reclassified as a private sector lender in 2019 after LIC bought a controlling 51 per cent stake for Rs 21,624 crore. This time round, the insurer stands to collect around Rs 26,440 crore. The government, meanwhile, has budgeted Rs 80,000 crore from asset monetisation this fiscal year and has raised just Rs 20,272 crore so far, with stake sales in LIC and Coal India reportedly next on the block.