Fairfax’s IDBI Bank bet enters the final stretch

The Cabinet Committee on Economic Affairs recently approved Fairfax Financial Holdings' acquisition of a 60.72% stake in IDBI Bank. In an interview, DIPAM secretary Arunish Chawla discussed the upcoming steps of the transaction, employee safeguards, and the government's broader disinvestment strategies. IDBI Bank holds significant land and buildings, though the sale value does not account for this.

An independent valuation, conducted by experts, showed the fair replacement value of the bank's assets to be higher. Following Cabinet approval, the next steps include communication with the RBI and the successful bidder, who must fulfill additional requirements and obtain clearance before signing the share purchase agreement. The buyer will face a five-year lock-in period, after which it must reduce its equity holding to 26%, as per RBI conditions.

The buyer will also need to address the merger of its existing businesses, including CSB, within a two-year timeframe. Employee and pensioner commitments will be protected throughout the process. IDBI Bank, previously promoted by LIC, will continue to operate as a going concern under the new promoter. The government plans to continue privatising public enterprises, including several transactions currently in progress.