IDBI Bank Sale Back on Track? Centre Weighs Revival of Below-Reserve Bids

The Centre is exploring ways to revive the stalled privatisation of IDBI Bank, including the possibility of revisiting bids from Prem Watsa-led Fairfax Financial Holdings and Emirates NBD, according to a report by Economic Times. Both bids were earlier rejected for falling below the reserve price.

The bids have reportedly not been formally scrapped and remain technically valid. The Centre is examining provisions under the tendering framework that permit acceptance of below-reserve-price offers under certain conditions.

"Multiple options are being examined, including how to complete the transaction in the ongoing round," an official told ET, adding that the disinvestment process was never officially abandoned.

The reserve price, fixed after bids were submitted but before they were opened, has not been disclosed to bidders or the public. A decision is expected soon, as the government looks to boost non-tax revenues against a budgeted ₹80,000 crore target from asset monetisation this fiscal year.

Given concerns over IDBI Bank's limited free public float (currently at just 5.29%), the Centre may also seek guidance from Sebi on valuation-related issues.

Timeline of the Stalled Sale

The story of IDBI Bank's troubled privatisation goes back nearly a decade.

In the mid-2010s, the bank was weighed down by rising bad loans and weak financials, which limited investor interest. To stabilise it, Life Insurance Corporation of India (LIC) stepped in as a strategic investor in 2018-19, acquiring a majority stake and taking management control. That move steadied the bank and set the stage for its eventual privatisation.

In 2022, the government and LIC announced plans to sell a combined 60.7% stake in the bank. The government was looking to offload 30.5% of its 45.5% holding, and LIC looking to sell 30.2% of its 49.2% stake. By early 2023, multiple investors had submitted expressions of interest. Over the next two years, the process moved through regulatory approvals and detailed due diligence, covering financial, operational and regulatory assessments.

In February this year, financial bids were finally submitted. According to a previous Reuters report, Canada's Fairfax Financial Holdings, Dubai's Emirates NBD and Kotak Mahindra Bank were among those who had submitted bids. However, Kotak Mahindra Bank later clarified it had not submitted a financial bid.

The government had hoped to wrap up the transaction before March 31, 2026. Unfortunately, that deadline was not met. Multiple media reports suggested the bids fell short of the government's reserve price, the minimum acceptable price below which it would not sell. Market conditions and investor risk perception, including the West Asia war, contributed to this gap, forcing the government to pause and reassess.

Had the deal gone through, it could have fetched a combined ₹66,000 crore, according to previous reported estimates. The successful bidder would also have had the option to rename the bank entirely.

The collapse of the sale was a setback not just for IDBI Bank but for the government's broader plan to reduce state ownership in the banking sector and attract private capital into public sector banks.

IDBI Bank's stock took a sharp hit in the aftermath, tumbling from a 52-week high of ₹118.45 to a low of ₹61.05 on March 30 on the BSE. The stock has since staged a partial recovery, changing hands at ₹75.57 on the BSE as of 10:30 AM on Friday, May 29.

What's at Stake

The government seeks to divest its 30.48% stake, alongside Life Insurance Corporation of India's 30.24% holding. At current market prices, the combined sale could reportedly fetch around ₹24,000 crore.

The eventual buyer will require a final clearance from the RBI under its 'fit and proper' criteria, along with approvals from the Competition Commission of India and other regulatory bodies. The successful bidder will also be required to make an open offer to IDBI Bank's minority shareholders.