Fairfax Wins 60.72% of IDBI Bank in ₹52,878 Crore Sale

The Union Cabinet has cleared the sale of a controlling 60.72% stake in IDBI Bank to Canada-based Fairfax Financial Holdings for about ₹52,878 crore, bringing to a close a privatisation process that began four years ago. The Cabinet Committee on Economic Affairs (CCEA) gave its approval on Wednesday, 14 October, naming Fairfax, acting through its vehicle 10955230 Canada Inc., as the strategic buyer at ₹81 a share.

The stake comes from two sellers. The Government of India is selling 30.48% and Life Insurance Corporation of India (LIC) 30.24%. When the deal closes, the government will keep about 15% of the bank and LIC about 19%, so the two will still hold roughly a third between them. The transaction has been described as India’s largest strategic disinvestment. Finance Minister Nirmala Sitharaman described the deal as bringing foreign direct investment into the bank while the state keeps a minority holding.

How the price was set

Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), said the winning bid of ₹81 a share was above the benchmark price. According to Business Standard, two independent valuers had put that benchmark at ₹75.99, so Fairfax paid about 6.6% more. The same report says a first-round bid of ₹75 was turned down before the improved offer came in.

An analyst quoted by the paper said the price works out to about 1.37 times IDBI Bank’s June 2026 book value and about 11.5 times its annualised Q1 FY27 earnings. Business Standard also mentioned a reserve price of ₹94.42. That figure is above the accepted bid, and its exact meaning in this sale has not been officially clarified.

The market had hoped for more. Business Standard reported that investors had expected something closer to ₹100–110 a share. IDBI Bank had closed at ₹90.44 on Wednesday, up from ₹82.92 the session before. On Thursday it fell nearly 8% in intraday trade to ₹83.33. Reports differ slightly on the size of the fall, but the reaction was clear: retail and institutional holders had been pricing in a richer exit than the Centre accepted.

A bank that rebuilt its balance sheet

The sale is happening at a very different moment from when the process began. IDBI Bank was under the Reserve Bank of India’s Prompt Corrective Action framework from May 2017 to March 2021. The government put about ₹25,000 crore into it between 2010 and 2020 to keep it afloat.

The turnaround since then has been substantial. Gross non-performing assets fell from 31.78% in September 2018 to 2.32% by March 2026, and net NPAs fell from 17.30% to 0.15%. Capital adequacy rose from 6.22% to 26.65% over the same period. The bank posted a record net profit of ₹9,513 crore in FY26, and its total business reached ₹6,27,149 crore at 30 September 2026, up 18% from a year earlier.

That recovery helps explain why the market had expected a higher price, since a cleaner, better-capitalised lender should command a richer valuation. The government has pointed out that it ran a competitive, two-stage process. Expressions of interest were invited in October 2022. Five parties responded, four passed the RBI’s fit-and-proper assessment, and two went on to submit financial bids.

Why it matters for investors and the banking sector

For the exchequer, the timing helps. Business Standard reported that the IDBI proceeds should push disinvestment receipts past the FY27 target of ₹80,000 crore, to an eight-year high. That matters at a time of high government borrowing and pressure on the bond market.

For the banking system, the deal sets a precedent. It marks a rare transfer of a large state-run lender to a foreign financial group, and it tests how far the RBI will let a single investor control an Indian bank. Fairfax founder Prem Watsa called the acquisition a “once-in-a-lifetime opportunity” on an investor call, according to MarketBeat. Fairfax is not new to Indian banking: it already holds 40% of Thrissur-based CSB Bank.

The deal comes with conditions attached, as reported. Fairfax’s voting rights will be capped at 26%. It must reduce its shareholding to 40% within 10 years and to 26% within 15 years. It has two years either to merge CSB Bank into IDBI Bank or to exit CSB. The government and LIC must stay invested for at least three years, and the IDBI brand is to be kept for the same period. LIC must bring its holding down to 15% within two years.

For depositors and borrowers, the government has said banking services, deposit protection and priority-sector lending obligations will continue unchanged, and the bank stays under RBI supervision. Rakesh Sharma is expected to remain as chief executive. N.S. Kannan has been proposed as chairman, subject to RBI approval.

What happens next

Several approvals are still needed. Fairfax has to present its credentials and a compliance roadmap to the RBI, and approvals from SEBI and IRDAI are also required. The government expects the deal to close this financial year. Fairfax has indicated the first quarter of 2027, and possibly earlier.

Two more things are worth watching. Under the approval, an empowered group of ministers can sell the government’s remaining stake without returning to the Cabinet, which leaves room for a further sale later. And the outcome here will shape how bidders and the government price the next public sector lender offered to private investors.

Shareholders, meanwhile, face a simpler question. With the shares still trading above the ₹81 transaction price even at Thursday’s intraday low, the market appears to be betting that Fairfax’s plans will be worth more than what it paid.