CCEA approves 60.72pc stake sale in IDBI Bank for Rs 52,878 crore

The CCEA has approved the sale of a 60.72 per cent stake in IDBI Bank for Rs 52,878 crore to a buyer linked to Fairfax Financial Holdings. The government and LIC will retain stakes, subject to regulatory approvals and completion

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved strategic restructuring of the IDBI Bank, deciding that an aggregate 60.72 per cent of the equity stake in bank to be sold to Canada Inc. whose parent company is Fairfax Financial Holdings for Rs 52,878 crore.

Of the total equity stake, the government’s share would be 30.48 per cent, and the LIC share would be 30.24 per cent, leaving a residual shareholding of 15 per cent with the government and 19 per cent with the LIC.

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Finance Minister Nirmala Sitharaman described the transaction as a “strategic restructuring” rather than strategic disinvestment, clarifying that the government and Life Insurance Corporation of India (LIC) will continue to hold stakes in the bank.

Due to its poor financial health, the bank required repeated infusion of capital, initially provided by the Government of India and later by the LIC.

The decision of the CCEA was implemented through a two-stage, competitive bidding process supported by a multi-layered, collective decision-making mechanism consisting of the Inter-Ministerial Group (IMG), the Core Group of Secretaries on Disinvestment (CGD) and the Alternative Mechanism (AM) consisting of an empowered Group of Cabinet Ministers, according to an official statement.

Of the five parties who initially submitted their expression of interest, four parties qualified as per the eligibility criteria and disqualification conditions prescribed therein, of which, two finally submitted their techno-financial bids and became Qualified Bidders (QBs) for this transaction.

After comprehensive evaluation by the CGD and after considering the recommendations of the Alternative Mechanism, the CCEA approved Canada Inc. (parent entity Fairfax Financial Holdings Ltd.) as the strategic buyer for this transaction “for a purchase consideration of Rs 52,878.0806181 crore for the acquisition of 60.72 per cent stake in the IDBI Bank Ltd, comprising 30.48 per cent equity shareholding held by the Gol and 30.24 per cent equity shareholding held by the LIC.”

The stock market price of the narrowly traded IDBI stock continued to be volatile and fluctuated both above and below the bid discovered price with a high-low range of Rs 118.38 to Rs 61.01 per share over the valuation period.

“The successful bidder will be required to present its credentials to the Reserve Bank of India in accordance with the Fit and Proper Assessment conducted at the EoI stage and submit its roadmap for the compliance of regulatory conditions prescribed therein. Once completed, this will be the largest FDI in the financial sector of our economy so far,” said the statement.