Government Upholds IDBI Bank Sale Valuation, Highlights ₹3,917 Cr Increase

The Ministry of Finance issued a detailed statement on Thursday to clarify the valuation and bidding procedures used in the strategic sale of IDBI Bank. The government emphasized that the approach adopted during the transaction increased the overall deal value by ₹3,917 crore.

The Core Group of Secretaries on Disinvestment (CGD), which was empowered by the Cabinet Committee on Economic Affairs (CCEA), was tasked with overseeing the final bidding phase and resolving any procedural concerns. The Finance Ministry noted that the CGD thoroughly reviewed the valuation methodology to ensure the strategic disinvestment was executed effectively.

Contrary to some speculation, the ministry confirmed that the reserve price for the sale remained unchanged throughout the process. It stated, "The reserve price was neither decreased nor increased, and the first round itself became functus officio after the initial bids were not approved."

Back in October 2025, the CCEA had given its approval for the strategic sale of a 60.72 percent stake in IDBI Bank to Canadian investment firm Fairfax Financial Holdings. This transaction carries an estimated value of around ₹53,000 crore, with the final bid price set at ₹81 per share.

Details of the Bidding Process

The initial bidding round took place during the financial year 2025-26 and was managed by the Department of Investment and Public Asset Management (Dipam) following its standard internal procedures. These procedures serve as indicative guidelines rather than strict regulatory requirements.

The ministry explained that no fixed benchmark exists for bidding as interested buyers independently assess a company's worth and submit confidential offers. Independent valuation agencies conduct fair enterprise assessments contemporaneous to the bids, which serve as comparators to judge the reasonableness of offers. Often, the bid price and valuation may not perfectly align, as one can be higher or lower than the other.

Given that Dipam lacks a formal internal framework to address such differences, the CCEA delegated authority to the CGD to make decisions in these situations.

Approval and Execution of Valuation Methodology

In April 2026, prior to soliciting best-offer bids, the CGD reviewed and approved the valuation methodology. Updated assessments were initiated in May after IDBI Bank’s financial statements for the year ending March 31, 2026, became publicly accessible in late April. This ensured that valuations reflected the most recent financial data available near the bidding period.

The ministry stressed the confidentiality maintained throughout the process. It was a double-blind system where bidders did not have access to valuations, and valuators were unaware of the bids. Only the CGD had full visibility to compare valuations with bids and determine their fairness.

Two independent advisory firms conducted separate valuation exercises. The transaction adviser focused on the business valuation and engaged specialists experienced with the Market Multiple Method, chosen due to the complex nature of the deal.

IDBI Bank’s Ownership and Regulatory Classification

IDBI Bank was fully government-owned until 2019 when Life Insurance Corporation of India (LIC) acquired a majority stake, making it government-controlled rather than government-owned. Because there is no explicit regulatory protocol for this hybrid status, the Reserve Bank of India (RBI) treats IDBI Bank as a private bank for regulatory purposes. Despite this, ownership remains predominantly with LIC and the government, and market participants continue to value it as a public sector entity.

Reasons Behind the Increased Deal Value

The ministry highlighted that the asset valuer incorporated established valuation techniques and factored in disputed tax liabilities. Provisions for these disputed taxes were included as indemnities following requests from qualified bidders, which helped encourage more competitive offers.

Such tax liabilities are considered low probability and revenue neutral for the government, since any additional tax payments would be reimbursed. The potential liability related to these taxes was estimated at ₹627 crore, whereas the bid price improvement of ₹3,917 crore significantly enhanced the transaction’s value to the government and LIC.

Finally, the government and LIC will retain residual stakes in IDBI Bank, enabling them to benefit from any future appreciation in the bank’s value after the strategic restructuring.

This sale marks a significant step in the government's ongoing efforts to privatize and restructure public sector financial institutions, aiming to improve efficiency and inject fresh capital. It also reflects a broader trend of involving private and foreign investors in key sectors to promote growth and competitiveness.