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Cabinet approves IDBI Bank stake sale to Fairfax. Stock down

Shares of IDBI Bank Ltd slipped by 8% to Rs. 83.33, after the Union Cabinet approved the sale of a 60.72 percent stake in the lender to Canada-based Fairfax Financial Holdings for Rs. 52,878 crore.

The government on October 14 approved the sale of a 60.72% stake in IDBI Bank to 10955230 Canada Inc., a vehicle of Canada's Fairfax Financial Holdings, at Rs. 81 per share, for a total consideration of about Rs. 52,878 crore. The stake is being sold by the Government of India (30.48%) and Life Insurance Corporation of India (30.24%), which will retain 15% and 19% respectively after the transaction.

The deal is subject to regulatory clearance, as the buyer must present its credentials to the Reserve Bank of India under the fit-and-proper assessment and submit a roadmap for meeting regulatory conditions. Once completed, it will be the largest foreign direct investment in India's financial sector, and it marks the end of the state's control of the lender, which was under the RBI's Prompt Corrective Action framework from 2017 to 2021.

The government has also been authorised to sell its residual stake through the open market, which could add to the supply of IDBI shares in the coming months, while LIC will manage its remaining holding as per its own procedures. Stock to remain in focus. Fairfax Group has 40% holding in the CSB. Therefore the group has to take exit from CSB or merge with IDBI so uncertainties over CSB ownership so the news is negative for CSB bank and positive for the IDBI.

At 11.10 am, IDBI Bank Ltd was trading at Rs. 84.06, down by 7.05%, with a volume of 42.27 lakh shares on the BSE.