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The Government of India and the Life Insurance Corporation of India (LIC) will reduce their combined shareholding in IDBI Bank to become public shareholders with a maximum stake of 15% each, following the strategic sale to Canada’s Fairfax Financial Holdings.
Their stake will be a maximum of 15 percent and they will have no representation on the bank’s board of directors, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said.
He told PTI that after the strategic restructuring, the strategic buyer will be responsible for running the bank and infusing capital if required.
“Both the Government of India and LIC want to become public shareholders. To become a public shareholder, your equity stake cannot exceed 15 per cent. You cannot even join the board of directors. Otherwise, your potential liability to the bank will be the same as that of a promoter,” Chawla said.
Arunish Chawla said that after the strategic restructuring, the strategic buyer will be responsible for managing the bank and periodically infusing capital into it. He said the market regulator has also directed LIC to reduce its stake in IDBI Bank from the current 19 percent to 15 percent. This will increase public shareholding in the bank by four percent.
This will make more shares available to retail investors and other public shareholders. Last week, the government approved the sale of a 60.72 percent stake in IDBI Bank to Canada’s Fairfax Financial Holdings for about Rs 53,000 crore ($5.5 billion). Fairfax Financial Holdings is a Canadian company. Its owner, chairman, and CEO is Prem Watsa.
This would be the largest foreign investment in an Indian bank and a significant milestone in the country’s long-delayed banking sector privatization drive. Fairfax will buy the government’s 30.48 percent stake, valued at approximately ₹26,620 crore.
It will also acquire a 30.24 percent stake in LIC, valued at approximately ₹26,440 crore. Fairfax, led by Canadian billionaire Prem Watsa, will pay ₹81 per share. This is higher than the reference fair value of ₹75.99 determined by two independent valuation agencies. The strategic transaction for IDBI Bank is expected to be completed by the end of the current fiscal year.
However, this will require regulatory approval from the Reserve Bank of India (RBI). Regarding concerns raised about the interests of minority and retail shareholders, the Secretary assured them that their interests would be fully protected in this transaction.
After the share purchase agreement is signed, the strategic buyer will make an open offer to minority shareholders, giving them the opportunity to sell their shares in accordance with applicable regulations. Chawla said the restructuring of IDBI Bank is the largest strategic transaction ever and will attract the largest foreign direct investment (FDI).
The deal marks a significant milestone in the long-stalled effort to privatize IDBI Bank and reduce the government’s stake in commercial enterprises. The sale process was set to begin in 2022. However, it suffered a setback earlier this year when initial bids fell short of the reserve price set by the government.
The strategic transaction of IDBI Bank is expected to be completed by the end of the current financial year, subject to regulatory clearance from the Reserve Bank of India (RBI). Fairfax will submit its technical papers to the RBI and present its credentials, including details required to meet additional compliance and regulatory requirements, Chawla said. After the RBI clears this, the share purchase agreement will be signed, paving the way for the transaction to be completed before the end of the current financial year, he said.
