IDBI Bank sale row: Finance Ministry defends valuation process, says reserve price was not changed

New Delhi: The finance ministry said the entire valuation methodology used in the stake sale of IDBI Bank was reviewed by the core group of secretaries on disinvestment (CGD). The CGD was empowered by the Cabinet Committee on Economic Affairs (CCEA) to remove all difficulties, including deviations from procedure, to ensure effective implementation of the strategic disinvestment transactions approved by the CCEA, it said. In a 'Clarification on the Process of Strategic Restructuring of IDBI' issued on Thursday, the ministry said in due exercise of these powers, the CGD itself determined the procedure for the second or the best offer round.

The reserve price was neither decreased nor increased, and the first round itself became functus officio after the initial bids were not approved, it stated. In this strategic sale, the initial bids invited in 2025-26 fell short of the reserve price arrived at that time and were not approved. Sealed bids reflecting their best offers were later invited from the qualified bidders in the financial year 2026-27.

The ministry said the first or initial bid round was conducted in the financial year 2025-26 by the Department of Investment and Public Asset Management as per its internal practices developed over a period of time, which were in the nature of indicative guidelines and not hidebound rules or regulations. Earlier this month, the government approved Fairfax Financial Holdings Ltd as the strategic buyer for a 60.72% stake in IDBI Bank, comprising 30.48% equity shareholding held by the central government and 30.24% held by Life Insurance Corporation of India, valuing the deal at ₹52,878 crore.

Fairfax's bid of ₹81 per share was above the benchmark price, as well as the fair value estimates of two independent valuation agencies, the government said on October 14. In its statement Thursday, the ministry said the process remained double-blind because the bidder did not know the valuation and the valuers did not see the bids. It is only the CGD which gets to see a complete picture and compares the bids with fair valuations to take a final call on the reasonableness of the bids submitted, it said.

The asset valuer also used robust and time-tested methodologies, including additional value for disputed tax demands, which were indemnified as a common demand of the qualified bidders to nudge the bid offer upwards, it said. This remains a low-probability event and revenue neutral for the government, as only the additional tax demand, if paid at all, will be eligible for reimbursement, it said. The potential liability that could arise on this account was only ₹627 crore, while the bid-discovered price was enhanced by ₹3,917 crore, enhancing the value of the transaction for the GoI and LIC, it said.

The government and LIC retain residual shareholdings, to get further benefit from the upside that is expected from the value enhancement following strategic restructuring of the bank going forward, the ministry said.