The IDBI Bank disinvestment process followed due procedure, with the Core Group of Secretaries on Disinvestment (CGD) approving the second round of bidding, the Department of Investment and Public Asset Management (DIPAM) said on Thursday.
The clarification comes amid questions from stakeholders, including bank unions, over the bank’s valuation and the bid submitted by Canada’s Fairfax Financial Holdings.
DIPAM said the initial bidding round was conducted in FY26. However, the bids were not approved, rendering that round functus officio, or no longer effective.
The department added that the reserve price was neither increased nor reduced. The CGD determined the procedure for the second round, also called the best offer round.
CGD approved procedure for second bid round
DIPAM said the Request for Proposal (RFP) provided for a situation in which the highest financial bid fell below the reserve price.
In such a situation, the government would decide the next course of action. Qualified interested parties could not subsequently challenge that decision.
However, no internal procedure had been prescribed for handling such a situation. The CGD therefore determined the process under powers delegated by the Cabinet Committee on Economic Affairs (CCEA) in August 2017.
The CCEA had authorised the CGD to take policy decisions on procedural issues and consider deviations required for implementing government-approved strategic disinvestment transactions.
DIPAM said the CGD reviewed the entire valuation methodology in April 2026, before the invitation for best offer bids.
IDBI Bank valuation involved independent advisers
The department said independent valuation agencies assessed the bank’s fair value to provide a comparator for evaluating the bids.
There was no predetermined benchmark for bidders, who independently valued the enterprise and submitted confidential offers. DIPAM said the discovered bid price and comparative valuation could be higher or lower than each other.
Two independent advisers conducted the valuation using separate methodologies. The transaction adviser carried out the business valuation and engaged experts using the Market Multiple Method, including the Comparable Company Method.
Since suitable comparable transactions were unavailable, the assessment relied on comparable listed public sector banks.
The valuation agencies began revising their assessments in May, after IDBI Bank’s financial accounts for the year ended March 31, 2026, became publicly available in late April.
DIPAM described the process as double-blind. Bidders did not have access to the valuations, while valuers could not access the bids. The CGD alone had access to both sets of information to assess the offers.
Tax indemnity provision and valuation explained
DIPAM said the asset valuation also considered disputed tax demands. An indemnity provision was incorporated at the request of qualified bidders to encourage higher offers.
The potential liability under this arrangement stood at Rs 627 crore. However, the discovered bid price increased by Rs 3,917 crore, enhancing the transaction value for the government and LIC, the department said.
The indemnity would apply only if the additional tax demand was ultimately paid. DIPAM described this as a low-probability event and said the arrangement would be revenue-neutral for the government.
The department also referred to its October 14 press note, which explained why IDBI Bank’s volatile and thinly traded share price was not used as the valuation benchmark.
Fairfax to acquire 60.72% stake for about Rs 53,000 crore
The government approved the sale of a 60.72 per cent stake in IDBI Bank to Fairfax Financial Holdings on October 14 for approximately Rs 53,000 crore.
The transaction covers the government’s 30.48 per cent stake, valued at around Rs 26,620 crore, and LIC’s 30.24 per cent holding, valued at approximately Rs 26,440 crore.
Fairfax, led by Canadian billionaire Prem Watsa, will pay Rs 81 per share. This is higher than the benchmark fair value of Rs 75.99 determined by the two independent valuation agencies.
The transaction is expected to be completed by the end of FY27, subject to regulatory clearance from the Reserve Bank of India (RBI).
The government and LIC will retain residual shareholdings in the bank, allowing them to benefit from potential value appreciation following its strategic restructuring, DIPAM said.
