Shares of IDBI Bank fell nearly 8 per cent on October 15, following a sharp rally in the previous trading session after the Union Cabinet approved Fairfax Financial Holdings’ proposal to acquire a 60.72 per cent stake in the lender for ₹52,878 crore.
On the BSE, IDBI Bank shares declined 7.71 per cent to close at ₹83.47, after touching an intraday low of ₹82.55, down 8.72 per cent. On the National Stock Exchange (NSE), the stock settled 7.67 per cent lower at ₹83.45.
The Cabinet approval marks a significant step in the government’s long-running disinvestment plan for the bank and could pave the way for one of the largest foreign investment transactions in India’s banking sector.
Under the proposed deal, the Centre will sell its 30.48 per cent stake, while the Life Insurance Corporation of India (LIC) will divest 30.24 per cent to 10955230 Canada Inc., an entity linked to Fairfax Financial Holdings, controlled by Canadian billionaire Prem Watsa.
The Cabinet Committee on Economic Affairs approved the proposal on Wednesday. The disinvestment process began in 2016, was revived in 2020 and advanced further with the issuance of a preliminary information memorandum in October 2022.
Finance Minister Nirmala Sitharaman described the transaction as a “strategic restructuring” rather than a conventional strategic sale. The government will retain a 15 per cent stake in IDBI Bank, while LIC will initially hold 19 per cent, with plans to reduce its stake to 15 per cent within two years.
Following the signing of the share purchase agreement, the buyer will be required to make an open offer for the 5.3 per cent stake held by public shareholders. Fairfax will also need to present its credentials to the Reserve Bank of India (RBI) in the coming weeks.
As part of the proposed arrangement, the new investor will have to reduce its holding to 26 per cent over the next 15 years. The transaction also includes a five-year lock-in period, while the buyer will be allowed to retain the IDBI Bank brand for three years.
Fairfax will additionally need to decide the future of its existing 40 per cent stake in Catholic Syrian Bank, including whether to sell the holding or explore a merger with IDBI Bank.
The government has completed relatively few major strategic disinvestment transactions in recent years. Notable examples include Air India in 2021–22, Ferro Scrap Nigam in 2024 and Indian Medicines Pharmaceutical Corporation in May 2026.
Earlier bids from Fairfax and Emirates NBD were rejected in March after falling below the reserve price of ₹94.42 per share. Officials had taken market volatility and the bank’s limited public shareholding into account while assessing the valuation.
According to Sitharaman, the proposed transaction is expected to support IDBI Bank’s next phase of growth by bringing in foreign investment while allowing the government to retain a minority stake. The move is also intended to strengthen the banking ecosystem and improve banking services.
The sale is expected to contribute to the government’s disinvestment and asset monetisation target of ₹80,000 crore for the current financial year.