IDBI Bank Disinvestment: Centre Defends Transparency in Valuation and Bidding

The Centre has defended the procedural transparency of the proposed disinvestment of IDBI Bank, asserting that the second round of bidding was conducted under an authorised decision-making framework and that independent valuation mechanisms were followed to establish the fairness of the transaction. The Department of Investment and Public Asset Management (DIPAM), in a detailed clarification issued on October 29, addressed questions surrounding the bank's valuation, the decision to conduct a fresh bidding round and the selection of Canada's Fairfax Financial Holdings as the strategic buyer.

The Cabinet Committee on Economic Affairs (CCEA) approved the sale of a combined 60.72 per cent stake for ₹52,878.08 crore on October 14. The transaction includes the government's 30.48 per cent stake, worth approximately ₹26,620 crore, and LIC's 30.24 per cent holding, valued at around ₹26,440 crore. Fairfax's winning offer of ₹81 per share exceeded the independently assessed benchmark value of ₹75.99.

Explaining the bidding process, DIPAM said the initial round conducted during FY2025-26 was discontinued after the offers failed to meet the reserve-price requirement. The first round consequently became functus officio, meaning it ceased to have further effect. The second or best-offer round was authorised by the Core Group of Secretaries on Disinvestment (CGD) under powers delegated by the CCEA in August 2017. DIPAM clarified that the reserve price was neither increased nor reduced and that the government's Request for Proposal permitted it to determine the next course of action when the highest bid fell below the reserve price.

The valuation process became controversial because the original reserve price was ₹94.42 per share, compared with the subsequent benchmark fair value of ₹75.99. DIPAM argued that IDBI Bank's volatile and thinly traded stock price was unsuitable as a valuation benchmark. The share price had moved from ₹42.40 in October 2022 to ₹108.12 in January 2026 before correcting to ₹70.38 in May 2026.

To address these concerns, two independent valuation agencies adopted separate methodologies, including the Market Multiple Method and Asset Valuation Method. The process remained double-blind, with bidders unaware of valuations and valuers having no access to financial offers. Only the CGD could examine both sets of information. The valuation also incorporated disputed tax demands through an indemnity provision carrying a potential liability of ₹627 crore, while the discovered bid price increased by ₹3,917 crore.

IDBI Bank's financial recovery has added significance to the transaction. Established in 1964 as a development financial institution, it became a commercial bank in 2004 and was placed under the RBI's Prompt Corrective Action framework in 2017. LIC acquired a controlling 51 per cent stake for ₹21,624 crore in January 2019. The RBI lifted the restrictions in March 2021. In FY2025-26, the bank reported a 27 per cent rise in net profit to ₹9,513 crore, while gross NPAs declined to 2.32 per cent and capital adequacy improved to 26.65 per cent.

Meanwhile, employee organisations have raised concerns over job security, pensions, reservation policies and the bank's future public-sector character. Congress leader Rahul Gandhi has also questioned the privatisation, while employees have announced a nationwide hunger strike on November 2 and 3.

Following the transaction, the government and LIC will retain 15 per cent and 19 per cent stakes, respectively. The acquisition remains subject to RBI regulatory clearance, with completion expected by the end of FY2026-27. DIPAM maintains that the process followed the authorised framework, although questions surrounding valuation, employee safeguards and public-sector ownership continue to shape the debate.