India's government has named a subsidiary of Fairfax Financial Holdings the strategic buyer for a 60.72% stake in IDBI Bank, in a deal worth about ₹52,878 crore ($5.6bn) that it describes as the largest foreign direct investment in the country's financial sector.
Why Fairfax Financial Holdings is buying IDBI Bank (60.72% stake)
Fairfax, led by Prem Watsa, plans to build a group spanning banking, insurance, investment banking and wealth management by contributing its interests in Go Digit Life Insurance and Go Digit General Insurance, and Fairfax India's stake in IIFL Capital Services, to IDBI Bank at market prices. Rakesh Sharma, IDBI's managing director and chief executive, is expected to continue to lead the combined business, with N. S. Kannan proposed as chairman.
Deal terms and financing
The winning bid of ₹81 a share compares with a fair value of ₹75.99 set by two independent valuers, according to the government. The government is selling 30.48% and LIC 30.24%, leaving them with 15% and 19% respectively. Fairfax expects to fund the purchase from cash, existing credit sources and potential asset sales.
Regulatory approvals and timing
Fairfax said this is not the final stage of the sale process and that no binding definitive agreements have been signed. The buyer must clear the Reserve Bank of India's fit and proper assessment, and the proposed Digit and IIFL Capital contributions need approval from the RBI and IRDAI and review by SEBI.
Market context
The government invited expressions of interest for IDBI Bank in October 2022. IDBI Bank shares fell more than 7% on 14 October after the approval.
