Mohit Singh
New Delhi: The Union Cabinet has cleared the strategic sale of a 60.72 per cent controlling stake in IDBI Bank to Canada-based Fairfax Financial Holdings for about Rs 52,878 crore (roughly $5.56 billion), in what is expected to become the largest foreign direct investment in India’s financial sector.
The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the proposal on Wednesday, October 14, selecting 10955230 Canada Inc — an entity backed by Fairfax — as the strategic buyer for the lender. Reuters reported the government’s announcement in a press release on October 14, while several Indian outlets carried the details on Thursday morning.
How the Deal Is Structured
Under the approved terms, the Centre will sell 30.48 per cent of its holding in IDBI Bank, while the Life Insurance Corporation of India (LIC) will offload 30.24 per cent, according to reports citing the official statement. Once the transaction closes, the government will retain a 15 per cent stake and LIC will hold 19 per cent, leaving the two promoters with a combined 34 per cent holding.
Both the government and LIC will withdraw their nominee directors from the bank’s board and continue as ordinary public shareholders without board seats, reports said. The retained 34 per cent stake is expected to be monetised in subsequent phases, according to coverage of the deal.
Rs 81 a Share, Above the Benchmark
Fairfax’s winning bid works out to Rs 81 per share. That is above the benchmark valuation of Rs 75.99 per share fixed on the basis of independent valuations carried out using the market-multiple and asset-valuation methods, the Finance Ministry said.
The bid price is, however, roughly 10 per cent below IDBI Bank’s closing price of Rs 90.39 on October 14 — a gap that showed up immediately in the market’s reaction to the announcement.
The Deal Is Not Fully Closed Yet
The transaction still has regulatory hoops to clear. Fairfax will have to present its credentials to the Reserve Bank of India for the prescribed “fit-and-proper” assessment and submit a roadmap for complying with the regulator’s conditions before the deal can be completed, reports citing the official statement said.
Reuters also reported that while Fairfax has been named the preferred strategic buyer, no binding agreements have been signed so far, meaning the transaction could still face delays if approvals do not come through.
How the Markets Reacted
IDBI Bank shares fell more than 6 per cent in Thursday’s trade, opening at Rs 89.86 on the NSE against Wednesday’s close of Rs 90.39 and touching an intraday low of Rs 83.62, Mint reported. LIC’s stock, on the other hand, rose nearly 1 per cent to touch Rs 401.90.
Analysts quoted by Mint cautioned that the agreed acquisition price of Rs 81 should not be treated as a guaranteed floor for the stock’s market price, and pointed to the open-offer terms as an important factor for minority shareholders. SMC Global Securities noted that the ownership change could improve operational efficiency, corporate governance and capital allocation over the long term, though the stock may stay volatile in the near term, Mint reported.
Why This Sale Matters
The approval brings one of India’s longest-running divestment processes close to the finish line. Reuters noted that New Delhi first said it would consider bringing its stake in the bank below 50 per cent in February 2016, with LIC steadily building its holding around the same time and becoming the majority owner in 2019, when the bank’s gross non-performing loans stood at nearly 30 per cent of total assets.
The bank’s turnaround story is part of the context. The RBI had placed IDBI Bank under its Prompt Corrective Action framework in 2017, lifting the restrictions only in 2021 after its financial position improved, with continued monitoring in place, reports said.
Union Minister Ashwini Vaishnaw said the strategic partnership would bring fresh capital into IDBI Bank and create new growth opportunities for micro, small and medium enterprises (MSMEs), small businesses and aspiring entrepreneurs, Mint reported.
Fairfax, founded by Indian-origin Canadian billionaire Prem Watsa, already has a strong India footprint. Its arm Fairfax India Holdings Corporation reported assets worth $3.8 billion as of June 30, 2026, and its Indian investments include IIFL Capital and online brokerage 5paisa, Mint reported.
Frequently Asked Questions
How much stake is being sold in IDBI Bank, and by whom?
A combined 60.72 per cent stake is being sold — 30.48 per cent by the Government of India and 30.24 per cent by LIC — to Fairfax Financial Holdings through its entity 10955230 Canada Inc.
What is the value of the deal?
The deal is valued at about Rs 52,878 crore (around $5.56 billion) at Rs 81 per share, which is above the Rs 75.99 benchmark valuation. It is expected to be the largest foreign direct investment in India’s financial sector.
Is the sale completed?
No. Fairfax must clear the RBI’s “fit-and-proper” assessment, submit a compliance roadmap and secure other regulatory approvals. Reuters reported that no binding agreements have been signed yet.
What happens to the remaining 34 per cent stake?
The government will keep 15 per cent and LIC 19 per cent as ordinary public shareholders with no board seats. Both promoters are expected to monetise these residual holdings in later phases.
