The Cabinet Committee on Economic Affairs has approved the sale of a 60.72% stake in IDBI Bank to a subsidiary of Canadian financial services company Fairfax Financial Holdings. The transaction has been valued at ₹52,878.08 crore.
The approved sale combines the Government of India's 30.48% holding with LIC's 30.24% stake. Fairfax has been selected as the strategic buyer after the government's divestment process.
The decision was taken by the committee chaired by Prime Minister Narendra Modi. The transaction will not remove the government and LIC entirely from the bank's ownership.
Stakes retained after the sale
Once the transaction is completed, the Government of India will retain 15% in IDBI Bank. LIC will continue to hold 19%, leaving their combined holding at 34%.
Union minister Ashwini Vaishnaw said the completed transaction would represent the largest direct foreign investment in India's financial sector. That description refers to the deal's eventual completion, while the current development is the Cabinet's approval.
The sale process began with an announcement in 2022. It passed through several approvals, including review by the core group of secretaries on disinvestment and an empowered group of Cabinet ministers.
The bidding process had earlier faced regulatory and procedural obstacles. It was halted in March after the bids failed to meet the government's expectations. The process has now received Cabinet approval for the Fairfax-backed transaction.
IDBI Bank shares rise
IDBI Bank shares gained ahead of the Cabinet approval. The stock rose 13% during the session, before ending 8.33% higher at ₹89.85.
During intraday trading, the shares reached ₹93.62 compared with the previous close of ₹82.92. The movement came ahead of the bank's second-quarter results, which were due to be announced on 17 October.
The share-price reaction reflects market activity around the approval and the upcoming results. The reported transaction itself remains subject to completion after the Cabinet decision.
Conclusion
The Cabinet has cleared Fairfax's purchase of a 60.72% IDBI Bank stake for ₹52,878.08 crore. The Government of India and LIC will retain a combined 34% holding after completion.
Frequently Asked Questions
Q. Who will buy the stake in IDBI Bank?
A subsidiary of Fairfax Financial Holdings, a Canadian financial services company, has been approved as the strategic buyer.
Q. How much of IDBI Bank will be sold?
A total 60.72% stake will be sold.
Q. Which shareholders are selling their stakes?
The Government of India is selling 30.48%, while LIC is selling 30.24%.
Q. How much is the transaction worth?
The approved transaction is valued at ₹52,878.08 crore.
Q. What stakes will the government and LIC retain?
The Government of India will retain 15%, and LIC will retain 19%.
Q. What was the combined retained stake?
Their combined holding after the transaction will be 34%.
Q. When was the sale process announced?
The sale process was first announced in 2022.
Q. How did IDBI Bank shares perform?
The shares rose 13% during the session and closed 8.33% higher at ₹89.85.
