Centre Approves 60.72% Stake Sale In IDBI Bank To Fairfax For Rs 52,878 Crore

The Union Cabinet on Wednesday approved the sale of a 60.72 per cent stake in IDBI Bank for Rs 52,878 crore to Canada Inc., whose parent company is Fairfax Financial Holdings. The move takes forward the government's long-pending plan to transfer management control of the lender and will become the country's biggest strategic disinvestment since the sale of Air India once completed. 

The 60.72 per cent stake being acquired by Fairfax will comprise a 30.48 per cent holding of the government and a 30.24 per cent stake held by the Life Insurance Corporation of India (LIC). Fairfax won the bid at Rs 81 per share. 

"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 Rs 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 government said in a statement.

"Once completed, this will be the largest FDI in the financial sector of our economy so far," the statement added. 

While LIC's holding in IDBI Bank is expected to drop from 19 per cent to 15 per cent over the next two years, the government's residual stake will be sold through the open market. 

Finance Minister Nirmala Sitharaman described the transaction as a "strategic restructuring" rather than strategic disinvestment and clarified that the government and LIC will continue to hold stakes in the bank.

The Reserve Bank of India's 'fit and proper' assessment of Fairfax will now be an important step in determining whether the proposed controlling shareholder meets the requirements for owning and managing a bank in India.

Fairfax, which holds a stake in CSB Bank, will have to either merge it with IDBI Bank or exit the holding within 2 years. 

Fairfax will have to also make an open offer to the minority shareholders of IDBI Bank. 

Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla told news agency PTI that the deal will be completed before the end of the current fiscal year.