Govt scrapped IDBI Bank stake sale after bids fell short of price expectations

The government sought over ₹70,000 crore for the 61% stake in IDBI Bank being sold jointly by it and the Life Insurance Corporation of India (LIC), before scrapping the proposed share sale due to poor investor interest, two people aware of the matter told Mint.

The divestment was likely being sought at a price of around ₹110 per share, which would value the lender at ₹1.2 trillion, the first of the two persons cited above said, both of whom spoke on the condition of anonymity.

This person added that neither of the offers made by the two interested parties, Canada’s Fairfax Financial Holdings Ltd. and Dubai’s Emirates NBD, was likely to have matched the government’s expectation, because of which the bidding process has now been halted.

The government and LIC have long been planning to sell a combined 61% stake in the lender. IDBI Bank received an in-principle approval from the Cabinet Committee on Economic Affairs for strategic disinvestment in 2021, with the government planning to sell 30.48% stake and LIC looking to offload another 30.24%. The government owns 96.5% of LIC.

Currently, both the government and LIC are classified as promoters of the bank. The government, through the President of India, holds a 45.48% stake in IDBI Bank and LIC owns 49.24% as of December-end 2025. Both would be classified as public shareholders upon completion of the stake sale.

Initial report

Last week, Bloomberg was the first to ​report that the government was likely to scrap the bidding process for its majority stake sale in IDBI Bank after the offers received were said to be below the government’s price expectations.

“The proposed strategic disinvestment of IDBI Bank Limited is a confidential process being undertaken by the Government of India (GOI) and, hence, IDBI Bank is not in a position to either confirm or deny the referenced news report,” The bank informed the exchanges on Monday, following a post-market report by Bloomberg on 13 March.

If completed, the deal would have represented the largest foreign investment in India’s banking sector.

Shares of the bank had settled 6.7% lower at ₹92.20 apiece on the BSE on Friday, with a market capitalisation at ₹99,116 crore. On Monday, the stock plummeted 16.5% to end at ₹77.

The share sale is unlikely to resume soon as the government waits for market volatility to ease, the second person said. The finance ministry may also explore alternative options for the stake, this person added.

One of these options might see the government holding on to its stake for a longer period before taking a call on divestment again. The ministry might also consider a merger of IDBI Bank with other smaller public sector banks, this person said.

Queries sent to the ministry of finance and IDBI Bank remained unanswered till press time.

Protecting public interest

To be sure, the Indian government’s divestment process is governed by the Department of Investment and Public Asset Management’s guidelines. These guidelines set a reserve price, or minimum price, after external advice from dealmakers, primarily to protect public interest and ensure fair valuation.

This price cannot be changed even if bidding interests don’t match the government’s expectations, explained Alay Razvi, managing partner at law firm Accord Juris.

“This price is fixed pre-bidding and cannot be casually altered mid-process based on market sentiment, as it lacks explicit procedural flexibility,” he said. “Revisions would require restarting via fresh approvals from an inter-ministerial group, a core group, and redoing an alternative mechanism, potentially inviting legal challenges for arbitrariness.”

In state-backed divestment plans, the government can cancel and re-invite bids to align with the oversight of the Cabinet Committee on Economic Affairs. “Until binding agreements are executed with a successful bidder, the state retains full discretion to cancel, defer, or restructure the sale if bids do not meet its expectations,” Raheel Patel, partner at Gandhi Law Associates, told Mint.