The government of India is likely to scrap the bidding process for the sale of a majority stake in IDBI Bank after the offers received were reportedly below the government’s minimum price expectations, according to a Bloomberg report citing people familiar with the matter.
The move would effectively bring the long-running privatisation attempt to a halt, the report said, with officials declining to disclose the size of the bids or the reserve price set by the government.
The Indian government and state-run Life Insurance Corporation of India (LIC) are planning to sell a 60.7% stake in IDBI Bank as part of the Centre’s broader privatisation programme aimed at reducing state ownership in the banking sector.
The government currently holds 45.48% in the lender, while LIC owns 49.24%.
Sources cited by the news outlet declined to reveal the identities of the bidders or the exact amounts offered.
Foreign investors had shown interest
Earlier reports had suggested that Canada-based Fairfax Financial Holdings had emerged as a frontrunner in the race to acquire the bank.
Dubai-based Emirates NBD was also reported to have submitted a bid for the lender.
If completed, the deal would have represented the largest foreign investment in India’s banking sector.
Stake valued at about $6.5 Billion
At current market prices, the combined 61% stake held by the government and LIC in IDBI Bank is valued at around $6.5 billion.
The planned divestment has been part of the government’s broader strategy to reduce state ownership in the banking sector and attract private capital into public sector banks.
The government has been trying to privatise the Mumbai-based lender for several years as part of its broader disinvestment programme.
Bids received
The proposed stake sale had attracted interest from several investors. According to a February report by Reuters, Canada-based Fairfax Financial Holdings, Dubai’s Emirates NBD, and Kotak Mahindra Bank were among those that had submitted bids for the lender.
However, Kotak Mahindra Bank later clarified that it had not submitted a financial bid for the acquisition of IDBI Bank.
Privatisation plan announced in 2022
The government first announced its plan to privatise IDBI Bank in 2022 as part of a wider disinvestment strategy aimed at bringing private capital and improved governance into public sector banks.
Authorities had earlier indicated that the transaction would be completed during the current financial year ending March 31, 2026.
According to earlier reports, the successful bidder would also have the option to rename the bank after acquiring the controlling stake.
Bank rescued in 2019
IDBI Bank had faced severe financial stress earlier in the decade due to a surge in bad loans and deteriorating asset quality.
In 2019, LIC stepped in to rescue the lender by acquiring a majority stake, effectively bringing the bank under the control of the state-owned insurer and stabilising its financial position.