MUMBAI: After years in the making, the government is set to complete the divestment of its stake in the already privatised IDBI Bank next month, with the three bidders -- Kotak Mahindra Bank, Emirates NBD Bank, and Fairfax India Holdings -- set to submit their final bids next week for the 61% stake that’s on offer.
The sale process involves approvals from the divestment department Dipam, the inter-ministerial group and the finance ministry, with the government set to pocket at least Rs 33,000 crore from the sale, according to sources.
The government and Life Insurance Corporation jointly hold a 94.7% stake in the bank, while the rest is with the public.
“The bids will be placed to the department of investment and public asset management (Dipam) in the finance ministry by next week,” a source in the know of the development told TNIE Friday.
It may be noted that Emirates NBD had in August picked up a 60% stake in the mid-sized private sector lender RBL Bank for $3 billion. Yet it is interested in another asset.
While the government is expecting to fetch a revenue of about Rs 33,000 crore for its 30.48% stake in bank. LIC is offloading a 30.24% stake.
"The entire process will be completed in FY26," the source said.
In a post-budget media interaction on February 1, Dipam secretary Arunish Chawla had said the strategic divestment of IDBI Bank had moved to the third phase–-meaning technical and financial bids have been invited.
"Before the end of the current financial year, we will be able to give further information in this matter," Chawla had said.
The proposal for the sale of IDBI Bank was first floated in February 2020, while a request for proposal was sent only in October 2022.
Kotak Mahindra Bank, the Toronto-based NRI businessman Prem Watsa’s Fairfax India Holdings, the UAE government owned lender Emirates NBD and the US-based asset management firm Oaktree Capital are said to have cleared the RBI's criteria.
While LIC was forced to pick up 51% in the bank in January 2019 (after the government could not get any other bidder for the bank which at that time had more than a third of its assets as NPAs) and since then was considered as a private lender, the government owns 45.48%. The remaining 4.7% are with the public, including retail, foreign investors and domestic institutional investors.
In fact, LIC picked up the majority stake in the bank after the government could not find any other buyer. The national insurer at that time was not a publicly traded entity -- LIC went public only in May 2023 -- and was forced to pick up a 51% stake in the bank for about Rs 21,624 crore, or Rs 61 a share. LIC in 2020 reduced its holding to 49.24% through a QIP.
TNIE had in December reported citing sources that Fairfax was leading the race as it’s offering “an all-cash deal that matches the current valuation of the bank of around $5 billion, while Kotak Bank was offering a mix of cash and stock option.”
December 2025 was the deadline given to bidders.
It may be noted that IDBI Bank’s shares have risen almost 35% this year alone, pushing its market capitalisation to around Rs 1.05 trillion and have nearly tripled since the government first announced plans to divest three years ago.
Prem Watsa’s Fairfax already owns a majority stake in the Thrissur-based CSB Bank (formerly Catholic Syrian Bank) since 2018. However, over the years, the Fairfax group, through its affiliate FIH Mauritius Investments, has pared its holding -- from 49.72% in 2018 to under 40% now -- to comply with RBI norms. It has to further reduce the stake to 26% over 15 years. In June 2024 it had sold about 9.7% for roughly Rs 595 crore to institutional investors.
The next major step is for the government to decide on a reserve price for the sale. According to the preliminary information memorandum issued in October 2022, the reserve price will be determined after bids are received but before they are opened. It will remain confidential and will not be disclosed to bidders.
For Kotak Mahindra Bank, buying IDBI Bank looks the only way to arrest the sharp deterioration in its business since the past few years, which was marked by an early departure of founder Uday Kotak from the bank in October 2023, and the many troubles it began to face since then.
An industry observer who sought to not be named told TNIE that this probably is the only way for Kotak Bank to remain relevant at all.
In 2022, the divestment department had first announced that it was privatising the bank and in 2023 it said it had received multiple expressions of interest. It was later reported that Fairfax Holdings, Kotak Bank, Emirates NBD, and Oaktree Capital had cleared the Reserve Bank’s fit and proper assessment.