Fairfax Financial Holdings plans to build a broader financial-services group around IDBI Bank by bringing its interests in Go Digit and IIFL Capital under the lender, as it looks to combine banking with insurance, wealth management and investment banking.
The plan follows the Cabinet Committee on Economic Affairs' approval of Fairfax's ₹52,878.08-crore acquisition of a 60.72% stake in IDBI Bank. The proposed contributions of its interests in Digit's life and general insurance businesses and IIFL Capital Services are subject to regulatory approvals.
“Our focus is to build the best global Indian bank in India. Not a Canadian bank, not an American bank. An Indian bank run by Indians,” Fairfax chairman and CEO Prem Watsa told Moneycontrol in an interview.
Banking, insurance and wealth management under one group
In its October 14 announcement, Fairfax said it proposed to contribute its interests in Digit's life and general insurance businesses and IIFL Capital Services to IDBI Bank at market prices. The contributions would require approvals from the relevant regulators, including the Reserve Bank of India (RBI) and the insurance regulator Irdai.
Fairfax has said the IDBI Bank acquisition can proceed independently of the proposed contributions.
The plan would bring IDBI Bank's lending and deposit operations together with Digit's insurance business and IIFL Capital's wealth management and investment banking services. The proposed structure could also give these businesses access to the bank's customer base and distribution network.
Watsa said there would be no change in how Go Digit and IIFL Capital are run. Fairfax has also said the existing leadership teams of the businesses would remain in place.
Rakesh Sharma to continue; Kannan proposed as chairman
Watsa said IDBI Bank's managing director and CEO, Rakesh Sharma, would continue after the acquisition.
“No, we like Rakesh Sharma,” he said when asked whether Fairfax planned to bring in a new chief executive.
N.S. Kannan, former MD and CEO of ICICI Prudential Life Insurance, is proposed as chairman of IDBI Bank, subject to RBI approval. Watsa said C.V. Rajendran, who previously led CSB Bank, would assist in an advisory capacity.
Fairfax assures employees on benefits
Watsa also said Fairfax did not intend to reduce existing employee benefits following the ownership change.
“Basically, with us, you can expect this: no change in benefits,” he said.
Separately, DIPAM Secretary Arunish Chawla has said existing employee service conditions and pension commitments are protected.
The stake being sold comprises 30.48% held by the government and 30.24% held by LIC. Following the transaction, the government is expected to retain 15% in IDBI Bank and LIC 19%. The acquisition is priced at ₹81 per share.
Fairfax also owns about 40% of CSB Bank. It has a two-year window to resolve the overlap arising from its holdings in the two banks. Fairfax has not yet mentioned any intention to merge the banks or exit one of its holdings.
Watsa said Fairfax expects the IDBI Bank acquisition to close early next year, subject to the remaining formalities and regulatory approvals.