Fairfax to acquire 60.72 % stake in IDBI Bank in Rs 53,000-crore privatisation deal in India

IDBI Bank shares dropped more than 7 per cent on Thursday, reversing part of the previous session's rally, as investors reacted to the proposed acquisition of a 60.72 per cent stake in the lender by Canada's Fairfax Financial Holdings for about Rs 53,000 crore ($5.5 billion).

The stock fell 7.54 per cent to Rs 83.62 on the Bombay Stock Exchange (BSE). On the National Stock Exchange (NSE), it declined 7.48 per cent to Rs 83.62.

IDBI Bank shares had surged 9 per cent before the announcement on Wednesday, adding Rs 8,086 crore to the bank's market valuation.

Fairfax Financial Holdings will acquire a 60.72 per cent stake in IDBI Bank for about Rs 53,000 crore ($5.5 billion), in what would be the largest foreign investment in an Indian bank and a major milestone in the country's long-delayed banking privatisation drive.

The Cabinet Committee on Economic Affairs (CCEA) approved Fairfax subsidiary M/s 10955230 Canada Inc. as the strategic buyer for the government's 30.48 per cent stake, valued at about Rs 26,620 crore, and the 30.24 per cent stake held by state-run Life Insurance Corporation of India (LIC), valued at about Rs 26,440 crore.

Fairfax, led by Canadian billionaire Prem Watsa, will pay Rs 81 per share, higher than the benchmark fair value of Rs 75.99 determined by two independent valuation agencies, an official statement said on Wednesday.

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 and faced a setback earlier this year when initial bids fell below the government's reserve price.

The transaction still requires approval from the Reserve Bank of India (RBI), which will conduct a “fit and proper” assessment, as well as the Competition Commission of India (CCI) and other statutory authorities.