The Central Cabinet of Ministers approved on Wednesday the sale of a 60.72% stake in IDBI Bank to the Canadian financial company Fairfax Financial Holdings. This stake is approved for sale amounting to INR 52,878.08 crore.
The Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, gave consent for Fairfax to become the strategic buyer of IDBI Bank. This deal involves the sale of 30.48% of the government's stake and 30.24% of the Indian Life Insurance Corporation (LIC).
After the sale of this stake, the government will retain 15% of the bank's shares, and LIC will hold 19%. Thus, their combined stake will be 34%. Union Minister Ashwini Vaishnaw stated that after the completion of this deal, it will represent the largest Foreign Direct Investment (FDI) in India's financial sector.
The process of selling IDBI Bank was overseen by several government bodies, including the group of secretaries for privatization and the group of ministers with relevant powers, and involved two-stage tender procedures. The initial announcement of the sale of IDBI Bank was made in 2022, but it was postponed due to regulatory and procedural hurdles. Tenders were suspended in March as they did not meet the government's expectations. Nevertheless, the deal has now been finalized and approved by the cabinet.
Before receiving cabinet approval, the bank's shares showed significant growth. IDBI Bank Limited shares increased by 13%. This rise occurred before the publication of the second-quarter results, scheduled for October 17. During the day, IDBI Bank shares rose from the previous closing price of INR 82.92 to INR 93.62. However, the stock later closed at INR 89.85, showing an increase of 8.33%.