Govt may seek bids for $7 bn IDBI Bank stake, advancing privatisation push

By Siddhi Nayak, Siddhartha Singh and Saikat Das

 

India is poised to seek bids for its $7.1 billion majority stake in IDBI Bank Ltd., a key step in its long-running effort to privatize the previously-distressed lender and accelerate a divestment push.

 

Talks with potential suitors are at an advanced stage, according to people familiar with the matter. A government agency is expected to formally open the bidding process as soon as this month, in what could be the biggest state-backed disposal of a bank stake in decades, they said, asking not to be identified discussing confidential information.

 

India is aiming to sell 60.72 per cent in the Mumbai-based lender, which amounts to about $7.1 billion at IDBI Bank’s current market price. The bank, once burdened by heavy bad loans, has emerged from a major cleanup, and returned to profitability in recent years after capital support and aggressive recoveries helped it cut non-performing assets sharply.

 

The government missed earlier deadlines to complete the sale due to hurdles such as delays in securing regulatory approvals. Government officials have repeatedly indicated the divestment process will be completed in the fiscal year ending March 2026. Shortlisted bidders are currently doing due diligence, the minister of state for finance said in a written reply to parliament questions this week. 

 

Kotak Mahindra Bank Ltd., Emirates NBD PJSC and Fairfax Financial Holdings Ltd. had shown so-called expression of interest in IDBI Bank and received a fit-and-proper criteria by the country’s central bank, the people said. An expression of interest is the first step in the bidding process, though may not result in a financial bid.

 

The federal government and state-owned Life Insurance Corp of India together own about 95 per cent in the lender. The government will sell 30.48 per cent of its stake in the bank, while LIC will offload 30.24 per cent, along with transfer of management control. 

 

Spokespeople for India’s finance ministry, LIC, IDBI Bank, Kotak and Fairfax didn’t respond to requests for comment. A spokesperson for Emirates NBD declined to comment. 

 

Suitors 

Kotak, backed by Asia’s richest banker Uday Kotak, is seen as the frontrunner to bid for IDBI Bank, the people said. Even so, the lender has signaled in talks that it won’t chase the deal at an inflated price, they said.

 

An M&A can “leapfrog” Kotak’s scale, Jefferies said in a note late last month. Still, if the government seeks cash for the deal, this could drag on Kotak’s capitalisation and the merged bank’s profits, it said.

 

Canadian billionaire Prem Watsa’s Fairfax, an active investor in India including in firms such as CSB Bank Ltd., remains in the fray, the people said. Emirates NBD, one of the Middle East’s largest lenders that recently announced a jumbo deal to buy a majority stake in RBL Bank Ltd., has also considered participating, they said.  

 

  Shares of IDBI Bank have risen nearly 30 per cent so far this year, resulting in a market value of more than ₹1 trillion ($11.6 billion). The government was pushing for a valuation of around ₹64,000 crore for the bank, Bloomberg News reported in 2022, a figure that’s long been surpassed as its shares rise in anticipation of a takeover. 

 

While the expectation is to have the winning bidder announced by end-March next year, the deal is still expected to stretch beyond that date as approvals and other clearances come into play, the people said.