Fairfax Financial Holdings Ltd.’s acquisition of a controlling stake in IDBI Bank Ltd. was the biggest foreign investment in India’s banking sector. It was also unusual in that no major investment banks were involved.
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The US$5.6 billion sale to Canadian billionaire Prem Watsa’s firm was approved Wednesday. Unlike other multibillion-dollar deals, Fairfax and IDBI decided to handle the transaction internally, without even starting a formal process to hire financial advisers.
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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KPMG secured a role advising New Delhi on the sale. A statement announcing the transaction said two professional agencies helped come up with a fair valuation for the government, without naming any other advisers.
The strategy would’ve helped Fairfax and IDBI save millions of dollars, even though India is notorious for paying low advisory fees. Investment bankers, meanwhile, missed a potential payday and a boost up the league tables.
While India maintains tight oversight of ownership structures and voting rights, it has become more receptive to foreign interest in its banking assets. Some of the biggest inbound deals have involved buyers from the Middle East and Japan. Emirates NBD Bank PJSC bought a majority stake in RBL Bank Ltd., while International Holding Co. invested in Sammaan Capital Ltd. Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. have all bought stakes in Indian financial firms.
Major global investment banks advised on all of those deals. Fairfax and IDBI may still bring in an investment bank later for the open offer to shareholders, but for now the usual suspects are left on the sidelines.
Representatives for IDBI, Fairfax and the Finance Ministry didn’t immediately respond to requests seeking comment.
With assistance from Siddhi Nayak, Anirban Nag, Melissa Shin and Ruchi Bhatia.
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