IDBI Bank stake sale: India's disinvestment secretary sees little chance of new buyer

what happened

The Indian government has decided to keep the IDBI Bank disinvestment going and give bidders another chance to improve their offers instead of scrapping the process. According to Moody's, DIPAM Secretary Arunish Chawla told CNBC-TV18 that the chances of attracting a new buyer ready to pay Rs.52,000 crore for the government and LIC stakes are "very, very remote." He said the reserve price stayed unchanged throughout the exercise.

Chawla explained that strategic disinvestment deals are not run like ordinary auctions with a fixed threshold. He cited the Paradeep Phosphates sale, where the accepted offer was 15% below the reserve price. The improved bid, he said, exceeded fair-value estimates and their average. The government also introduced an income-tax indemnity for bidders capped at Rs.627 crore, which added Rs.3,917 crore to the bid value.

why it matters

The deal with Canada-based Fairfax Financial Holdings covers a 60.72% stake for about Rs.53,000 crore ($5.5 billion) and would be the largest foreign investment in an Indian bank. Completion depends on approval from the Reserve Bank of India and is targeted by the end of the current financial year.

market impact

Indian banks: prolonged uncertainty over the IDBI Bank sale weighs on sentiment in the banking privatisation story

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