Fairfax COO says IDBI has potential to be finest universal Indian bank with global reach

IDBI Bank shares on the stock market have, since the announcement of the bid, traded lower than the offer price as it moved towards the bank’s fundamental value as uncertainty surrounding the disinvestment eased, they added.

The disinvestment, people said, followed a global, transparent and competitive bidding process conducted by the government through its transaction adviser. All prospective bidders underwent a fit-and-proper assessment by the Reserve Bank of India, followed by detailed due diligence for those who qualified.

The policy framework for IDBI Bank’s disinvestment was outlined in the Union Budgets for 2016-17 and 2021-22, with the formal sale process commencing in October 2022. The move followed a prolonged period of financial stress at the lender, which remained under the RBI’s Prompt Corrective Action framework from May 2017 to March 2021 and required repeated capital infusions from the government and LIC.

Seeking to dispel questions over the role of Niti Aayog in the disinvestment, the people said the policy think tank had made no recommendation for the sale. IDBI Bank is a scheduled commercial bank, not a public sector undertaking, and Niti Aayog had only been asked to identify a list of PSUs.

Addressing allegations of a potential conflict of interest involving former Niti Aayog CEO Amitabh Kant, they said he was never part of any government panel that recommended the disinvestment. Kant left Niti Aayog in 2022 and joined Fairfax in 2025, three years later.

Reached for comments, Peter Clarke, President & Chief Operating Officer, Fairfax, said that, as a policy, Fairfax does not comment on any of its ongoing transactions.

“We are of the view that IDBI has the potential to be the finest universal Indian bank with global reach. This would help raise India’s credit-to-GDP ratio and transform the lives of ordinary citizens.”

The proposed acquisition will give Fairfax management control of IDBI Bank, while the government and Life Insurance Corporation of India (LIC) will retain a combined 34 per cent stake and participate in the lender’s future growth, the people cited earlier said.

Beyond acquiring control of the bank, Fairfax plans to bring its interests in Go Digit General Insurance, Go Digit Life Insurance and Fairfax India Holdings’ stake in IIFL Capital Services into IDBI Bank, creating an integrated financial services platform that could compete with established banking groups such as State Bank of India, ICICI Bank, HDFC Bank and Kotak Mahindra Bank.

The investor’s strategy is to leverage IDBI Bank’s banking franchise and customer base to cross-sell insurance, investment banking and wealth management products, broaden its revenue streams and strengthen its competitive position in India’s expanding financial services market.

From Financial Stress To Strategic Asset

IDBI Bank’s turnaround provides an important backdrop to the transaction.

The lender spent nearly four years under the RBI’s Prompt Corrective Action framework, from May 2017 to March 2021, amid deteriorating asset quality and capital constraints. It required repeated capital support from the government and LIC during that period.

The bank has since returned to profitability, reporting a profit of around Rs 9,000-10,000 crore in the previous financial year.

The turnaround has also prompted questions about the rationale for privatising a lender that is now profitable and better capitalised.

The government’s argument is that IDBI’s improved financial position, combined with Fairfax’s existing customer base and banking infrastructure, offers an opportunity to build a broader financial services franchise rather than operate it as a standalone lender, the people said.

Fairfax has experience in regulated financial businesses across North America and India, spanning more than four decades in the former and investments in India since 2001. Its international banking investments include ICICI Bank, Greece’s Eurobank, Egypt’s CIB Bank and Bank of Ireland.

In India, Fairfax invested in CSB Bank in 2018, when the lender was grappling with substantial bad loans and capital requirements. Fairfax said it infused capital, upgraded technology and processes, retained and trained employees, and strengthened the bank’s board. CSB Bank has remained profitable every quarter since, they said.

Fairfax also incubated ICICI Lombard with ICICI Bank in 2001. Its Indian investments include Thomas Cook India, Quess Corp, IIFL Group, Digit Insurance and Bengaluru International Airport.

In 2015, it established Fairfax India Holdings Corporation, a Toronto-listed permanent-capital investment vehicle focused on India.

The Bigger Financial Services Plan

The proposed contribution of Digit’s insurance businesses and IIFL Capital is central to Fairfax’s strategy for IDBI Bank.

The people said the proposed transfer of these interests would be separate from its acquisition of the 60.72 per cent controlling stake. Settlement for the contributed businesses could take place through IDBI Bank shares or other means approved by the relevant authorities.

The distinction is significant because questions have been raised over whether IDBI Bank’s surplus capital could effectively be used to acquire businesses owned by Fairfax, potentially allowing the lender to finance part of its own ownership transition.

The proposed integration, they said, would give IDBI access to established insurance and capital markets businesses that it would find difficult to acquire independently without paying substantial premiums.

The combined platform could allow the bank to cross-sell banking, life and general insurance, investment banking and wealth management products to a wider customer base, improving customer retention and generating additional revenue streams.

The model is similar to the diversified financial services structures operated by some of India’s largest banking groups.

Fairfax also believes the combination could strengthen IDBI Bank’s competitive position and contribute to expanding India’s credit-to-GDP ratio by improving access to financial products and services.

The acquisition and the proposed integration of Fairfax’s financial services businesses will require regulatory, shareholder and other approvals.

For the government and LIC, the transaction offers an opportunity to relinquish majority ownership while retaining exposure to the lender’s future growth. For Fairfax, it represents a substantial expansion of its India financial services portfolio and a bet that combining a revitalised bank with established insurance and capital markets businesses can create a more competitive institution.

The central test will be whether the proposed combination delivers sustainable value for IDBI Bank and its shareholders, while ensuring that the acquisition financing, valuation of contributed assets and governance arrangements withstand regulatory and public scrutiny.

The deal could reshape IDBI Bank’s business model and competitive positioning.