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The Government of India has released important FAQs related to the strategic restructuring and stake sale of IDBI Bank to Prem Watsa’s Fairfax Financial Holdings for ₹52,878 crore.
Frequently Asked Questions (FAQs) on Strategic Restructuring of IDBI Bank Ltd.
Q1. Who is the Strategic Buyer for IDBI Bank Ltd.?
Answer: M/s 10955230 Canada Inc. (parent entity M/s Fairfax Financial Holdings Ltd.) has been approved as the Strategic Buyer for IDBI Bank Ltd.
Q2. What is the size of this transaction?
Answer: The purchase consideration for this transaction is Rs. 52,878.0806181 crore (in words, Rupees Fifty-Two Thousand Eight Hundred Seventy-Eight Crore Eight Lakh Six Thousand and One Hundred Eighty-One only).
Q3. How will it be split between the Government of India (GoI) and the Life Insurance Corporation of India (LIC)?
Answer: A 60.72% stake out of the total shareholding of IDBI Bank Ltd. is being sold through this transaction. It comprises 30.48% shareholding held by the Government of India and 30.24% shareholding held by LIC. The proceeds will be divided in the same proportion.
Q4. How many entities were involved in the bidding process?
Answer: Of the five parties that initially submitted their Expressions of Interest, four parties qualified according to the eligibility criteria and disqualification conditions prescribed in the Preliminary Information Memorandum (PIM). Of these, two finally submitted their techno-financial bids and became Qualified Bidders (QBs) for this transaction.
Q5. What methodologies were used for the valuation of IDBI Bank Ltd.?
Answer: The fair value of the enterprise was determined using two alternative methodologies, namely the Market Multiple Method and the Asset Valuation Method.
Q6. Who carried out the valuation exercise?
Answer: The valuation of the enterprise was carried out by two independent, professional valuation agencies appointed for the purpose. Their names cannot be disclosed due to confidentiality guarantees enshrined in the process.
Q7. What role did the stock market price play in the valuation of IDBI Bank?
Answer: The volatile stock market price of the narrowly traded IDBI stock fluctuated both above and below the bid offer price, with a low-high range of Rs. 61.01 to Rs. 118.38 over the valuation period.
The stock market price was disregarded because it tended to misalign the valuation with the intrinsic value of the enterprise. Instead, relative valuation using the Market Multiple Method was used to determine the fair market value of the enterprise, based on the closing accounts of all public sector banks as of 31 March 2026.
Q8. How have the assets, including land and properties, been valued for IDBI Bank?
Answer: The Asset Valuation Method, which considered both tangible and intangible assets, including land and properties, along with liabilities, was used to determine the fair net asset value of the enterprise. The valuation was based on IDBI Bank’s audited accounts as of 31 March 2026.
Q9. What was the benchmark price used for this transaction?
Answer: The average of the two independent valuations, at Rs. 75.99 per share, served as the benchmark price for evaluating the qualified bids.
The winning bid was found to be higher than the benchmark price as well as the fair value estimates of both independent valuation agencies.
Q10. How was the benchmark price determined?
Answer: The benchmark price was the average of the fair market value determined by the Market Multiple Method and the fair net asset value determined by the Asset Valuation Method.
Q11. What is the further course of action?
Answer: The successful bidder will now present its credentials to the Reserve Bank of India (RBI) in accordance with the ‘Fit & Proper’ assessment conducted at the Expression of Interest (EoI) stage. It will also submit a roadmap for compliance with the regulatory conditions prescribed therein.
Q12. What is the residual equity stake left with the Government of India and LIC?
Answer: The Government of India will retain a residual equity stake of 15%, while LIC will retain a 19% equity stake.
Both will withdraw their nominees from the Board and become public shareholders.
Q13. How will the Government of India and LIC dispose of their residual shareholding in IDBI Bank?
Answer: The Cabinet Committee on Economic Affairs has delegated powers to the Alternative Mechanism to undertake minority stake sales of the residual Government of India shareholding through the open market, in accordance with the standard operating procedure.
LIC will be free to manage its residual shareholding in accordance with its internal procedures while ensuring compliance with the directions of its regulators.
Q14. What impact will it have on the banking sector and the economy at large?
Answer: The transaction is expected to have a significantly positive effect on India’s banking and financial sector.
After privatisation, IDBI Bank would be able to generate funds without depending on government assistance, as has been the experience in the past.
The strategic buyer is expected to infuse private capital, introduce new technology and bring better management practices. These changes are expected to enhance the bank’s business potential and make it more competitive in terms of credit and deposit growth.
Q15. What impact will it have on India’s external sector amid geopolitical tensions?
Answer: This transaction will be the largest foreign direct investment (FDI) in India’s financial sector so far. It is expected to generate positive sentiment towards economic reforms while improving the country’s overall investment climate.
