The Indian Ministry of Finance is currently reviewing the strategic disinvestment process for IDBI Bank. Officials have clarified that previous bids for a 60.72% stake in the lender were not formally scrapped but have been put on hold due to significant valuation disparities.
Government Seeks Fair Value Amidst Disparity
Sources familiar with the matter indicate that the government adopted a cautious approach after determining that the offers received did not adequately reflect the bank's fair value. A senior finance ministry official noted, "We took a wait-and-examine route," signaling that the process remains active but paused for reassessment rather than being cancelled outright.
The Centre is engaged in high-level internal discussions to evaluate the path forward and potentially revive the strategic sale. Multiple aspects of the transaction are being re-examined to ensure that any eventual deal aligns with current market realities and safeguards public value. "The intent is not to sell at an undervalued price, but to ensure a fair and balanced transaction," a person aware of the discussions emphasized.
Reserve Price and Bid Shortfall
The disinvestment process had previously encountered hurdles due to a substantial mismatch between government expectations and the bids submitted. The proposed sale of a 60.72% stake in IDBI Bank faced setbacks primarily because of a steep reserve price set at approximately Rs 90,000 crore. This figure, determined confidentially by an inter-ministerial panel based on independent valuations, served as the minimum acceptable offer.
Reports suggest that the bids received were significantly lower, with some offers reportedly coming in at less than 60 percent of the established reserve price. While four entities were initially shortlisted, only two are understood to have submitted financial bids, including Canada-based Fairfax Financial Holdings. This considerable gap between the reserve price and the offers led to the pausing of the process.
Commitment to Strategic Disinvestment
Regarding timelines, an official stated that the process remains dynamic and is likely to advance once market uncertainties stabilize. Finance Minister Nirmala Sitharaman has consistently reaffirmed the government's commitment to pursuing strategic disinvestment, including that of IDBI Bank.
The Centre, which holds a 45.48% stake in IDBI Bank, along with Life Insurance Corporation of India (LIC), which owns 49.24%, plans to jointly divest a majority 60.7% stake. IDBI Bank had previously been rescued in 2019 by LIC following a surge in bad loans, making its eventual privatization a significant test case for broader banking sector reforms in India.