New Delhi, Oct 29 (PTI) The Department of Investment and Public Asset Management (DIPAM) on Thursday said the second round of bidding for strategic disinvestment of IDBI Bank was conducted under a procedure determined by the Core Group of Secretaries on Disinvestment (CGD), which was empowered by the Cabinet Committee on Economic Affairs (CCEA) to address procedural issues and deviations.
The initial round of bidding was conducted in the financial year 2025-26, but the bids were not approved, following which the first round became functus officio, or ceased to have further effect, the DIPAM said in a statement.
It added that the reserve price was neither reduced nor increased and the procedure for the second round, also referred to as the best offer round, was determined by the CGD.
Explaining the bidding mechanism, DIPAM in a clarification said there was no pre-determined benchmark for bids, as bidders independently value the enterprise and submit their offers confidentially.
Independent valuation agencies are engaged to assess the fair value of the bank, which serves as a comparator to determine the reasonableness of the bids.
“The bid discovered price and the comparative valuation can, therefore, be above or below each other,” it said.
The clarification follows questions raised by many, including the bank union, regarding IDBI Bank’s valuation and bid price by the proposed bidder Fairfax of Canada.
The Request for Proposal (RFP) also provides for a situation where the highest financial bid is lower than the reserve price. Under the provision, the government decides the further course of action, and qualified interested parties cannot subsequently question the decision.
The DIPAM further said there was no internal procedure prescribed to deal with such a situation, prompting the CGD to determine the process under powers delegated by the CCEA in August 2017.
The CCEA had empowered the CGD to take policy decisions on procedural issues and consider deviations, as necessary, for effective implementation of strategic disinvestment transactions approved by the government, it said.
The department said the entire valuation methodology was reviewed by the CGD in April 2026, ahead of the invitation for best offer bids.
Since the valuation comparator needed to reflect the financial position contemporaneous with the bids, independent valuation agencies began revising their assessments in May after the March 31, 2026, financial accounts became publicly available in late April.
The process remained “double blind”, with bidders unaware of the valuations and valuers not having access to the bids, it said, adding, the CGD alone had access to both sets of information to assess the reasonableness of the offers.
The valuation was undertaken by two independent advisers using distinct methodologies. The business valuation was carried out through the transaction adviser, which also engaged experts in the Market Multiple Method, including the Comparable Company Method, it said.
As suitable comparable transactions were not available, the valuation relied on comparable listed public sector banks, it said.
DIPAM noted that IDBI Bank was a government-owned banking company until 2019, when Life Insurance Corporation of India (LIC) acquired a majority stake, after which it became a government-controlled banking company.
The Reserve Bank of India began treating it as a private bank for regulatory purposes, although the government and LIC continued to hold the overwhelming majority of its shares.
The asset valuation also factored in disputed tax demands, with an indemnity provision incorporated at the request of qualified bidders to encourage higher offers.
DIPAM said the potential liability under this arrangement was Rs 627 crore, while the discovered bid price increased by Rs 3,917 crore, enhancing the value of the transaction for the government and LIC.
The indemnity would apply only if the additional tax demand was ultimately paid, making it a low-probability event and revenue-neutral for the government, it said.
The department also referred to its earlier press note dated October 14, 2026, explaining why IDBI Bank’s volatile and thinly traded stock price was not used as the valuation benchmark.
The government and LIC would retain residual shareholdings in the bank to benefit from potential value appreciation following its strategic restructuring, DIPAM said.
The government on October 14 approved the sale of a 60.72 per cent stake in IDBI Bank to Canada’s Fairfax Financial Holdings for about Rs 53,000 crore (USD 5.5 billion), in what would be the largest foreign investment in an Indian bank and a major milestone in the country’s long-delayed banking privatisation drive.
Fairfax will be the strategic buyer of the government’s 30.48 per cent stake, valued at about Rs 26,620 crore, and the 30.24 per cent stake held by LIC, valued at about Rs 26,440 crore.
Canadian billionaire Prem Watsa-led Fairfax will pay Rs 81 per share, higher than the benchmark fair value of Rs 75.99 determined by two independent valuation agencies.
The strategic transaction of IDBI Bank is expected to be completed by the end of the current financial year, subject to regulatory clearance from the Reserve Bank of India (RBI). PTI DP NB
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