Govt examines the IDBI disinvestment process, bids were “not scrapped”

The Ministry of Finance is currently reviewing the disinvestment process of IDBI Bank, with officials clarifying that bids received earlier were “not scrapped” but temporarily put on hold over valuation concerns.

Officials familiar with the matter said the government adopted a cautious approach after determining that the offers did not reflect the bank’s fair value. “We took a wait-and-examine route,” a senior finance ministry official said, indicating that the process remains active, though paused for reassessment.

The Centre is holding a series of internal high-level discussions to evaluate the way forward and potentially revive the strategic sale. According to sources, multiple aspects of the transaction are being re-examined to ensure that any eventual deal aligns with market realities while safeguarding public value. “The intent is not to sell at an undervalued price, but to ensure a fair and balanced transaction,” a person aware of the discussions noted.

The disinvestment process had earlier run into hurdles after a mismatch between expectations and bids. The proposed strategic sale of a 60.72% stake in the lender faced setbacks due to a steep reserve price of around Rs 90,000 crore, which effectively set a high benchmark for bidders. The reserve price, confidentially determined by an inter-ministerial panel based on independent valuations served as the minimum acceptable offer.

Sources indicated that the bids received were significantly lower, with offers reportedly coming in at less than 60 percent of the reserve price. While four entities were shortlisted during the process, only two are understood to have submitted financial bids, including Canada-based Fairfax Financial Holdings. The gap between the reserve price and the bids led to the process stalling, rather than being formally cancelled.

On being asked about timelines, the official said the process remains dynamic and is likely to move forward once market uncertainties stabilise.

Finance Minister Nirmala Sitharaman recently reaffirmed that the government remains committed to pursuing strategic disinvestment, including that of IDBI Bank. The Centre, which holds a 45.48% stake in the bank, along with Life Insurance Corporation of India, which owns 49.24%, plans to jointly divest a majority 60.7% stake.

IDBI Bank had previously been rescued in 2019 by LIC following a surge in bad loans, making its eventual privatisation a key test case for broader banking sector reforms.