Fairfax joins a wave of foreign firms expanding in India
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Canadian billionaire Prem Watsa’s Fairfax Financial Holdings Ltd. will acquire a stake in IDBI Bank Ltd. for 528.78 billion rupees (US$5.6 billion), making it one of biggest foreign investment in India’s rapidly growing financial services sector.
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Fairfax joins a wave of foreign firms expanding in India, drawn by the burgeoning wealth class and the world’s fastest-growing major economy. Japanese lenders alone spent more than US$6 billion combined, buying stakes in Indian banks last year, including deals by Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc.
Prime Minister Narendra Modi’s government has been looking to sell the Mumbai-based lender for several years, part of its efforts to pare state ownership in the banking sector. But the sale had often run into hurdles such as delays in securing regulatory approvals.
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Fairfax, whose earlier bid for IDBI Bank failed to meet the government’s reserve price, was considering increasing its offer by a few rupees per share, Bloomberg News had reported.
The latest breakthrough in the IDBI stake sale will be seen as a shot in the arm for Modi who is seeking to convert India into a developed economy by 2047. To achieve his ambition of boosting gross domestic product 10 times to about US$30 trillion by 2047, funding from banks must increase to about 130 per cent of GDP from around 56 per cent.
Indian authorities have been discussing ways to create stronger and larger banks, including more foreign participation in India’s financial sector. It is also toying with the idea of merging state-run banks to create financial giants.
With assistance from Rajesh Roy
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