Kotak vs Fairfax: Who Will Win the Race for IDBI Bank’s 61% Stake?

Synopsis:- A high-stakes battle is underway for a 60.72% stake in a major public sector bank, with final bids submitted after a two-year process. The Centre aims to raise ₹80,000 crore in FY27, while regulatory approvals and an open offer for 5% minority shareholders remain crucial next steps.

Two big players are competing to buy a majority stake in IDBI Bank. Canadian company Fairfax Financial and India’s Kotak Mahindra Bank submitted their final bids. They’re both trying to acquire a 60.72% share that currently belongs to the Indian government and Life Insurance Corporation (LIC).

What’s Being Sold

The government and LIC together own more than 90% of IDBI Bank. They’re now selling about 61% of this holding to private buyers. This is one of the biggest bank privatization deals in India’s recent history.

Furthermore, the government has set a minimum price for the bank, but it’s keeping this number confidential. Only a small group of officials knows this reserve price. The bidders won’t be told what this floor price is before submitting their offers.

According to officials, this reserve price is based on two things: the bank’s business value and its physical assets. However, IDBI Bank’s buildings and land make up only about 3% of its total worth. The market regulator SEBI’s pricing rules may also influence the final price.

A Long Journey

This sale process began in October 2022, almost two and a half years ago. The deal faced multiple delays as the government worked to remove obstacles for potential buyers. Initially, bids were expected in early January, but the deadline was pushed to after the February 1 budget announcement. The government hopes to raise ₹80,000 crore from selling public assets in the 2026-27 financial year, and IDBI Bank’s sale is a key part of this plan.

What Happens Next

The winning bidder isn’t done yet. They must pass several important tests. First, the Reserve Bank of India will check if the buyer meets its “fit and proper” standards for running a bank. The Competition Commission will also review the deal to ensure it doesn’t harm market competition.

Additionally, the new owner must make an “open offer” to buy shares from IDBI Bank’s minority shareholders, the remaining small investors who hold about 5% of the bank.

Special Permissions Needed

To make this sale smooth, the government and LIC requested to give up their “promoter” status. This is a technical requirement that could otherwise complicate the transfer of ownership.

The government also asked SEBI for an exemption from the rule requiring listed companies to keep at least 25% of shares publicly traded. This flexibility allows the new buyer to hold a larger stake without immediately selling shares to the public.

The Bottom Line

After years of preparation, IDBI Bank’s privatisation is now in its final stage. By March 2026, we should know who will take control of this important financial institution and reshape India’s banking landscape.

Conclusion

Privatisation of IDBI Bank is an interesting phase in the economic history of Indian banking sector reforms, as Fairfax and Kotak are in the fray, and the success of this deal, apart from the winning bid, would depend on several other key issues that would send an important signal to investors with regard to future PSU disinvestments.

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