The government and Life Insurance Corporation of India (LIC) intend to retain stakes of up to 15 per cent in IDBI Bank after the proposed strategic sale to Canada's Fairfax Financial Holdings Ltd, without board representation, DIPAM Secretary Arunish Chawla has said.
The strategic buyer will be responsible for running the bank and infusing capital whenever required following the proposed restructuring, Chawla told PTI.
"Both the Government of India and LIC want to become public shareholders. To become public shareholders, you cannot hold more than 15 per cent equity. You also cannot sit on the board. Otherwise, you have the same contingent liability for the bank as a promoter has," he said.
The Department of Investment and Public Asset Management (DIPAM) Secretary said the responsibility of managing the bank and capitalising it from time to time would rest with the strategic buyer.
He also said the market regulator has directed LIC to reduce its stake in IDBI Bank from a post-diluted 19 per cent to 15 per cent. This would increase the bank's public float by four percentage points, making more shares available to retail investors and other public shareholders.
Last week, the government approved the sale of a 60.72 per cent stake in IDBI Bank to Canada's Fairfax Financial Holdings for about Rs 53,000 crore (USD 5.5 billion). The transaction would mark the largest foreign investment in an Indian bank and a major milestone in the country's long-delayed banking privatisation drive.
Fairfax will acquire the government's 30.48 per cent stake, valued at about Rs 26,620 crore, and LIC's 30.24 per cent stake, valued at about Rs 26,440 crore.
The Canadian billionaire Prem Watsa-led Fairfax will pay Rs 81 per share, above the benchmark fair value of Rs 75.99 determined by two independent valuation agencies.
The transaction 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.
Following RBI clearance, the share purchase agreement will be signed, paving the way for completion of the transaction before the end of the current financial year, he said.
Addressing concerns over minority and retail shareholders, Chawla assured that their interests would be fully protected as part of the transaction.
After the share purchase agreement is signed, the strategic buyer will be required to make an open offer to minority shareholders, giving them an opportunity to tender their shares in accordance with applicable regulations.
Chawla said IDBI Bank restructuring is the biggest ever strategic transaction and would attract the largest FDI.
The deal marks a major milestone in the long-delayed effort to privatise IDBI Bank and reduce state ownership of commercial enterprises. The sale process began in 2022 but faced a setback earlier this year when initial bids fell below the government's reserve price.