Govt defends IDBI Bank sale process, says earlier norms were only indicative
The Union finance ministry on Thursday defended the strategic sale of IDBI Bank to Fairfax Financial Holdings, rejecting allegations of wrongdoing in the processes adopted.
The late-night clarification came following a Business World report which claimed deviations from the government’s own rules about disinvestment, and alleged that government officials saw the bids before setting the sale price. Also, the final sale price didn’t factor in the share price of the bank, and its valuation was compared with other state-run banks while it’s categorized as a private bank, the report said.
On 14 October, the government had announced the sale of a combined 60.72% stake of the government and state-run LIC in IDBI Bank to a Fairfax-controlled entity for ₹52,878 crore. IDBI was categorized as a private sector bank after LIC acquired a stake in the bank in 2019.
The ministry said the first or initial bid round was conducted in FY26 by the Department of Investment and Public Asset Management (Dipam) as per internal practices developed over a period of time, which “are in the nature of indicative guidelines and not hidebound rules or regulations”.
“The foreword itself states that the procedure suggested is not to be construed as a rigid, legal framework, which may require due adaptation/modification in the best interest of successful execution of the transaction in a time bound manner,” the ministry said.
The bids were below reserve price in the first round, prompting a fresh valuation exercise. Subsequently, the bidder whose revised bid was the higher than the other competitor and above the revised benchmark price was declared winner.
“The winning best offer bid of ₹81 per share was above the benchmark price, as well as the fair value estimates of both the independent valuation agencies. It was, therefore, adjudged to be reasonable and approved,” Dipam secretary Arunish Chawla had said after the Cabinet meeting to approve the sale.
“Given the complex nature of strategic transactions, the indicative guidelines give flexibility to ensure cost and time spent in lengthy processes is not wasted,” the ministry said on Thursday.
It also cited the press note of 14 October that explained that there is no “a-priori benchmark for bidding”.
“The bidders do their own valuation and submit their bids in a confidential manner. Independent agencies are hired to do a fair valuation of the enterprise contemporaneously, which is then used as a comparator to assess the reasonableness of the bids submitted. The bid discovered price and the comparative valuation can, therefore, be above or below each other,” the ministry said.
As for not comparing the IDBI Bank valuation with private banks, the ministry said the bank was a government ‘owned’ banking company till 2019, but became a government ‘controlled’ banking company after the LIC acquired 49.24% in 2019.
“Since there is no specific regulatory protocol for this situation, the RBI started treating it as a private bank only for regulatory purposes, even though the ownership stayed overwhelmingly with the LIC and the GoI, and the market investors continued to value it as a public sector entity,” it added.
