Indian government has announced a majority stake sale in the state-owned IDBI bank to Canadian firm Fairfax Financial Holdings for Rs 52,878 cr ($5.5 billion).
- Fairfax’s winning bid offered a price of Rs 81/ sharee for a 60.7% stake in IDBI Bank.
- During the bidding process, the government arrived at an average fair value of IDBI shares at Rs 75.99 / share.
- Before announcement, the share was trading at around Rs 90/ share.
- IDBI is currently owned 49.24% by LIC, 45.48% by Government and balance 5.28% by institutions and public.
- Fairfax for it’s 60.7% stake, would acquire 30.5% from Government and 30.2% from LIC.
- The entire Rs 52,878 cr will go to the selling shareholders (the Government and LIC) and nothing will come as new capital into IDBI Bank.
- RBI guidelines cap Fairfax’s voting rights at 26% despite Fairfax holding a majority equity stake.
- Fairfax is also required by RBI to progressively reduce its equity holding down to 26% within 15 years.
- Since Fairfax already holds a 40% stake in CSB Bank, the RBI has given them two years to either merge or sell CSB Bank to satisfy dual-licensing rules.
The subject announcement would finally conclude the long pending stake sale in IDBI Bank. (The government had first officially communicated it’s intent in February 2016 during the Union Budget FY17 speech).