The proposed structure would put at the centre of Fairfax’s financial-services businesses in India, allowing the bank to offer customers banking products alongside insurance through and investment banking and wealth-management services through IIFL Capital. Fairfax said its longer-term objective is to build IDBI Bank into a leading global Indian bank headquartered in India.
“Combining IDBI Bank, Digit, and IIFL Capital would create an entity that is well-positioned to participate in the continued growth and success of Indian markets, and we expect it will provide meaningful and significant benefits to Indian consumers and businesses, as well as to IDBI Bank, Digit, IIFL Capital and to Fairfax for many decades to come,” Prem Watsa, chairman and chief executive officer of , said in the statement.
Fairfax Financial Holdings proposes to contribute all its interests in Go Digit Life Insurance and Go Digit General Insurance, collectively referred to as Digit, to IDBI Bank.
“We are very excited about the prospect of combining Digit with IDBI Bank as it would significantly strengthen Digit’s distribution footprint,” said Kamesh Goyal, founder and chairman of Digit.
Fairfax India Holdings similarly proposes to contribute all its interest in IIFL Capital Services to the bank.
“This partnership would create a unique opportunity for IIFL Capital to accelerate growth across investment banking, institutional equities, wealth and asset management,” Nirmal Jain, founder of IIFL Group, said in the statement.
The proposed combination is aimed at creating a one-stop financial-services platform for Indian customers, with IDBI Bank’s banking franchise complemented by Digit’s insurance offerings and IIFL Capital’s investment banking, institutional equities, wealth and asset-management businesses.
After completion of the acquisition and the proposed contributions, Rakesh Sharma, currently managing director and chief executive of IDBI Bank, is expected to continue leading the combined company’s operations. Fairfax also plans to bring former CSB Bank CEO C. VR. Rajendran into the leadership group, while former ICICI Prudential Life managing director N. S. Kannan is proposed as chairman, subject to .
Kamesh Goyal would continue to lead Digit, while IIFL Capital’s existing management would remain responsible for its operations.
The restructuring, however, will require several regulatory clearances. The proposed contribution of both Digit and IIFL Capital requires approval from the Reserve Bank of India as well as review and approval by the Securities and Exchange Board of India. The transfer of Digit will additionally require approval from the Insurance Regulatory and Development Authority of India.
Fairfax has been declared the strategic buyer for the government’s proposed sale of a 60.72% stake in IDBI Bank. Its bid values the stake at about Rs 52,878 crore, based on a price of Rs 81 per share. Fairfax expects to fund the purchase through a combination of cash on hand, existing credit sources and potential asset sales.
The transactions are not yet final. No binding definitive agreements have been entered into, and Fairfax said the IDBI Bank purchase could still proceed without either or both of the proposed Digit and IIFL Capital contributions.
Fairfax said it expects the combination to put the bank in a stronger position to benefit from continued growth in Indian bank assets and deposits and the country’s expanding middle class. It also sees an enlarged IDBI Bank playing a role in increasing India’s credit-to-GDP ratio.
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