Govt Approves ₹52,878-Crore IDBI Bank Sale to Fairfax; ₹81 Per Share Bid Clears Valuation Benchmark – Indian PSU

The Union Cabinet has approved the sale of a 60.72% stake in IDBI Bank Ltd. to 10955230 Canada Inc., the parent entity of Fairfax Financial Holdings Ltd., for ₹52,878.08 crore, marking a major milestone in the government’s strategic disinvestment programme.

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the strategic buyer at its meeting on October 14, 2026, following a competitive bidding process involving multiple layers of scrutiny and evaluation.

The transaction covers the Government of India’s 30.48% equity stake and Life Insurance Corporation of India’s (LIC) 30.24% holding. Following the sale, the Centre will retain 15% of the bank’s equity, while LIC will hold 19%.

The government has defended the transaction’s valuation, stating that the successful bid of ₹81 per share exceeded the benchmark price of ₹75.99 per share arrived at through independent valuation exercises.

Initial Bids Rejected After Falling Short of Reserve Price

The IDBI Bank strategic sale process was initiated following the CCEA’s approval for restructuring the lender and transferring management control to a strategic investor.

The Preliminary Information Memorandum inviting expressions of interest was issued on October 7, 2022. Five parties initially submitted expressions of interest, of which four qualified under the prescribed eligibility criteria and disqualification conditions. Two bidders eventually submitted techno-financial bids.

According to the government’s account, the initial bids invited during the 2025-26 financial year failed to meet the reserve price of ₹94.42 per share and were not approved.

The government subsequently invited fresh sealed bids representing the qualified bidders’ best offers during the 2026-27 financial year, seeking to maximise the value of the transaction.

The stock price stood at ₹70.38 per share on May 18, 2026, the last trading day before the invitation of the best-offer bids.

Government Explains Why Market Price Was Not Used as the Sole Benchmark

One of the key aspects of the transaction is the government’s explanation of how the valuation benchmark was determined.

The government stated that IDBI Bank’s stock price had been volatile during the valuation period, fluctuating between ₹61.01 and ₹118.38 per share. It argued that the market price of the relatively thinly traded stock did not necessarily reflect the bank’s intrinsic value.

The government therefore relied on two independent valuation methodologies.

The first was the Relative Valuation by the Market Multiple Method, which assessed the bank against market multiples derived from the closing accounts of public sector banks as of March 31, 2026.

The second was the Asset Valuation Method, which considered tangible and intangible assets, including land and properties, alongside liabilities, using IDBI Bank’s audited accounts as of March 31, 2026.

Two professional valuation agencies independently assessed the enterprise using these methodologies. The average of their valuations worked out to ₹75.99 per share.

The winning bid of ₹81 per share was above this benchmark and, according to the government, above the fair-value estimates of both valuation agencies. On this basis, the bid was considered reasonable and approved.

From Financial Stress to Strategic Disinvestment

IDBI Bank’s strategic sale follows years of financial stress that required capital support from the Government of India and LIC.

On May 5, 2017, the Reserve Bank of India placed the bank under the Prompt Corrective Action (PCA) framework in view of its non-performing assets and losses. The RBI subsequently lifted the restrictions through a letter dated March 10, 2021, subject to specified conditions and continued monitoring.

The government has presented the strategic sale as the next phase in the bank’s restructuring, bringing in a private strategic investor with management control while retaining minority stakes for the Centre and LIC.

The transaction has been pursued through a two-stage competitive bidding process supported by the Inter-Ministerial Group, the Core Group of Secretaries on Disinvestment and the Alternative Mechanism comprising an empowered group of Cabinet Ministers.

RBI Approval Remains a Key Condition

The approval of Fairfax-backed 10955230 Canada Inc. does not eliminate the remaining regulatory requirements.

The successful bidder will have to present its credentials to the Reserve Bank of India under the fit-and-proper assessment framework and submit a roadmap for complying with the applicable regulatory conditions.

The government has described the proposed transaction, once completed, as the largest foreign direct investment in India’s financial sector to date.

Government Retains Option to Sell Another 15% Stake

The CCEA has also delegated powers to the Alternative Mechanism to undertake the sale of the government’s residual 15% stake in IDBI Bank through the open market, in accordance with the prescribed standard operating procedure.

LIC will independently manage its remaining 19% shareholding under its internal procedures and in compliance with directions issued by its regulators.

The immediate transaction will transfer a controlling stake to the Fairfax-backed buyer, while the government’s decision to retain a minority holding leaves open the possibility of further disinvestment in the future.

The completion of the sale will now depend on regulatory compliance and fulfilment of the applicable transaction conditions.