Fairfax plans to fold Digit, IIFL into IDBI Bank

The government will retain a 15% stake in IDBI Bank, while LIC will hold 19% following the bank’s strategic restructuring. — Fairfax plans to place its stakes in Digit and IIFL Capital Services under IDBI Bank, creating a diversified Indian financial services group following its $5.56 billion acquisition deal.

Canadian investment group Fairfax Financial Holdings plans to bring its existing Indian financial services investments under IDBI Bank, creating a diversified financial services group spanning banking, insurance, investment banking and wealth management.

The proposed restructuring follows Centre's approval of the sale of a 60.7% stake in IDBI Bank to Fairfax in a deal valued at Rs 52,878 crore ($5.56 billion), one of the country's largest cross-border banking transactions.

Also read: Cabinet approves Rs 52,878 crore IDBI Bank sale to Fairfax arm in India’s largest financial-sector FDI

Under the proposed arrangement, Fairfax plans to transfer its 30.2% stake in IIFL Capital Services and its 49% stake in Digit to IDBI Bank, making the lender the holding company for all three businesses, the Canadian group said in a statement.

The restructuring remains subject to approvals from banking and insurance regulators.

Banking, insurance and wealth management under one group

The proposed structure would bring together IDBI Bank's lending operations, Digit's insurance businesses and IIFL Capital's investment banking and wealth management operations.

Digit, founded by Kamesh Goyal, comprises Go Digit General Insurance and Go Digit Life Insurance. IIFL Capital Services, founded by Nirmal Jain and R Venkataraman, operates in investment banking and wealth management.

Fairfax is also in the process of increasing its stake in IIFL Capital to 51% through an open offer, according to the company.

The proposed consolidation would expand the range of financial services housed under IDBI Bank, although the final structure will depend on regulatory approvals.

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Leadership structure outlined; no operational changes expected

Rakesh Sharma, the current chief executive officer of IDBI Bank, will lead the proposed combined entity, according to Fairfax.

CV Rajendran, former chief executive officer of CSB Bank, and NS Kannan, former managing director and CEO of ICICI Prudential Life, would also take leadership roles. Kannan would serve as chairman, the company said.

Fairfax said it does not expect the restructuring to result in changes to the governance, management or operating structure of Digit or IIFL Capital.

The proposed reorganisation would bring Fairfax's banking, insurance and capital markets interests in India under a single holding company, subject to the required regulatory clearances.

(With inputs from Reuters)