IDBI Bank Disinvestment: Government Considers OFS Route After Bid Failures
New Delhi – The Indian government is considering selling a stake in IDBI Bank through an Offer-for-Sale (OFS) to increase public shareholding, following the unsuccessful attempt to divest a 60.72% stake jointly held with Life Insurance Corporation of India (LIC). The move aims to address the bank’s limited public float and improve valuation.
Failed Privatization Attempts and Current Shareholding
Earlier this month, bids from potential buyers reportedly fell short of the reserve price, leading to the scrapping of the proposed sale of the majority stake. Currently, the public float in IDBI Bank stands at only 5.29%, hindering fair valuation. LIC holds a controlling stake of 49.24%, whereas the Government of India owns 45.48% of the bank.1
OFS as a Potential Solution
Expanding the public float by 10-15% is seen as crucial for more reliable price discovery and transparent valuations, according to sources.1 An OFS could provide a benchmark for valuation and pave the way for future strategic sales.
Previous Attempts and LIC’s Role
This marks the government’s second attempt to privatize IDBI Bank, initially announced in 2016 by then-Finance Minister Arun Jaitley.1 Prior to this, the government had attempted privatization due to valuation concerns. LIC acquired a 51% controlling stake in IDBI Bank in January 2019 for approximately Rs 21,624 crore to rescue the lender from bad loans as part of a disinvestment process.1 This led to the bank being reclassified as a private-sector bank by the Reserve Bank of India.
Recent Developments and Bidder Interest
In May 2021, the Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank.1 KPMG India was appointed as the transaction advisor in October 2022.1
Financial bids were received in February 2026 from Emirates NBD Bank and Fairfax India.1 Fairfax Financial, backed by Prem Watsa, is currently considered the frontrunner to acquire a controlling stake, competing with Kotak Mahindra Bank.3 Fairfax is leaning towards an all-cash offer, potentially worth $7 billion based on current market prices.3
Looking Ahead
The government’s consideration of an OFS route signals a shift in strategy to broaden public shareholding and enhance the attractiveness of IDBI Bank for potential investors. The outcome of this process will be closely watched by the Indian banking sector and investors alike.1