Fairfax leads race to acquire majority stake in IDBI Bank from govt, LIC

Fairfax has moved ahead in the race to buy a majority stake in IDBI Bank, with Kotak Mahindra Bank still in the fray as the government and LIC prepare to finalise bids for the lender's sale

The government’s long-running plan to exit IDBI Bank has reached a crucial stage, with Toronto-based Fairfax Financial now seen as the strongest contender for a majority takeover, according to a report by The Economic Times. The company is ahead of rival bidder Kotak Mahindra Bank as the deadline for submitting financial offers approaches.

 

The union government and Life Insurance Corporation (LIC) together plan to sell 60.72 per cent stake, valued at nearly $7 billion at current market prices.

Fairfax, Kotak shortlisted from earlier round

 

Only two serious bidders -- Fairfax Financial and Kotak Mahindra Bank -- remain in the race. Both were shortlisted after expressing interest when the privatisation process began two years ago.

 

Fairfax, led by Indian-Canadian investor Prem Watsa, is reportedly preparing an all-cash bid that closely matches IDBI Bank’s current valuation, the news report said.

 

IDBI Bank’s stock has risen almost 25 per cent this year, pushing its market capitalisation to around ₹1.02 trillion.

 

Kotak Mahindra Bank, meanwhile, is said to be weighing a combination of cash and shares for its offer. The news report quoted sources as saying that final bids may spill over into early January.

 

Emirates NBD, which had initially shown interest, is reconsidering whether to remain in the final round. The bank recently signed a deal to acquire a controlling stake in RBL Bank, and this new transaction may influence its decision, the news report said. 

‘Fit and proper’ status cleared

 

IDBI Bank’s shares have nearly tripled since the government first announced plans to divest three years ago. They closed at ₹95 on Thursday, giving the lender a market value of about ₹1 trillion (more than $11 billion).

 

Both Fairfax and Kotak Mahindra Bank have undergone Reserve Bank of India (RBI) checks to ensure they meet the “fit and proper” criteria needed to place financial bids. Regulators have already issued clearances to both.

 

Fairfax already owns a majority stake in CSB Bank, acquired in 2018 after receiving RBI approval.

Reserve price to be set after bids

 

The next major step is for the government to decide on a reserve price for the sale. According to the preliminary information memorandum issued in October 2022, the reserve price will be determined after bids are received but before they are opened. It will remain confidential and will not be disclosed to bidders.