IDBI Bank shares fall nearly 8 per cent after Rs 52,878-crore Fairfax deal gets Cabinet nod

Shares of IDBI Bank fell nearly 8 per cent on October 15 after the stock rallied in the previous session, following the Union Cabinet’s approval of a proposal by Fairfax Financial Holdings to acquire a 60.72 per cent stake in the lender for Rs 52,878 crore.

On the BSE, IDBI Bank shares declined 7.71 per cent to close at Rs 83.47, after falling as much as 8.72 per cent to Rs 82.55 during the session. On the National Stock Exchange (NSE), the stock dropped 7.67 per cent to settle at Rs 83.45.

Under the approved transaction, the Centre will sell a 30.48 per cent stake and the Life Insurance Corporation of India (LIC) will offload 30.24 per cent to 10955230 Canada Inc, an entity linked to Fairfax Financial Holdings, controlled by Canadian billionaire Prem Watsa. The transaction is expected to result in one of the largest foreign direct investment deals in India’s financial sector.

The Union Cabinet’s Committee on Economic Affairs cleared the proposal on Wednesday. The disinvestment process began in 2016, was restarted in 2020 and moved forward with the issuance of a preliminary information memorandum in October 2022.

Finance Minister Nirmala Sitharaman said the transaction would be a “strategic restructuring” rather than a strategic sale, with the government retaining a 15 per cent stake in the bank. LIC will retain 19 per cent initially, with its stake to be reduced to 15 per cent within two years.

Following the signing of the share purchase agreement, the Canadian entity will be required to make an open offer for the 5.3 per cent stake held by public shareholders. Fairfax will also have to present its credentials to the Reserve Bank of India (RBI) in the coming weeks.

The buyer will be required to reduce its holding to 26 per cent over the next 15 years. The transaction includes a five-year lock-in period, while the company will be permitted to retain the IDBI Bank brand for three years.

Fairfax will also need to decide on its existing 40 per cent holding in Catholic Syrian Bank, including whether to sell the stake or pursue a merger with IDBI Bank.

The government’s disinvestment drive has seen a limited number of completed strategic sale transactions, including Air India in 2021-22, Ferro Scrap Nigam in 2024 and Indian Medicines Pharmaceutical Corporation in May 2026.

The earlier bids by Fairfax and Emirates NBD were rejected in March after they fell below the reserve price of Rs 94.42 per share. Officials had considered market volatility and the bank’s limited public shareholding while determining the valuation.

Sitharaman said the transaction would help support the bank’s next phase of growth through foreign investment while allowing the government to retain a minority stake. She added that the move was intended to strengthen the banking ecosystem and improve banking services.

The sale is also expected to contribute towards the government’s disinvestment and asset monetisation target of Rs 80,000 crore for the current financial year.