Canada-based Fairfax Financial Holdings Ltd has engaged Deepak Parekh, former Chairman of erstwhile HDFC Ltd, and Paresh Sukthankar, former Deputy Managing Director of HDFC Bank, as Advisors to help with its proposed acquisition of IDBI Bank. Following the consummation of the proposed acquisition, the Prem Watsa-founded Fairfax expects that the operations of the newly combined company would continue to be led by Rakesh Sharma, the current Managing Director and Chief Executive Officer of IDBI Bank. The leadership group for IDBI Bank has been firmed up, comprising CVR Rajendran, the former Chief Executive Officer of CSB Bank, as well as NS Kannan, the former Managing Director and Chief Executive Officer of ICICI Prudential Life Company and Chief Financial Officer of ICICI Bank, who will act as Chairman, all subject to approval of the Reserve Bank of India. As per The Hindu BusinessLine, Sharma's appointment came as a surprise to several within IDBI Bank as he had been sent to the Mumbai-headquartered outfit as a stop gap CEO with the Centre hoping to move ahead with its plan to privatise the bank.
The $5.6 billion acquisition of 60.72% stake in IDBI Bank by Fairfax Financial Holdings represents the biggest foreign investment in India's banking sector and was completed without involving major investment banks. Unlike other multibillion-dollar deals, Fairfax and IDBI decided to handle the transaction internally, saving millions of dollars in advisory fees. The deal was approved by the Cabinet Committee on Economic Affairs (CCEA) and involves Fairfax purchasing the government's 30.48% stake for approximately ₹26,620 crore and LIC's 30.24% stake for approximately ₹26,440 crore. While India maintains tight oversight of ownership structures and voting rights, it has become more receptive to foreign interest in banking assets, with recent deals involving buyers from the Middle East and Japan. The strategy allowed Fairfax and IDBI to bypass the usual investment banking process, though the companies may still bring in an investment bank later for the open offer to shareholders.
Fairfax expects to finance the $5.6 billion acquisition through a combination of holding company cash, subsidiary dividends, asset sales and contributions from Go Digit and IIFL Capital. The group holds $2.3 billion in cash and marketable securities at its holding company level as of June 30, 2026, plus another $2.3 billion in investments in associates and consolidated non-insurance businesses. Fairfax has already sold half its position in Poseidon for approximately $1.9 billion and expects the previously announced sale of Eurolife to close in the second half of 2026 for approximately $900 million. CEO Prem Watsa emphasized that the funding plan would not involve any long-term debt issuance, with the group generating average annual earnings of approximately $4.3 billion over the last three years.
To make IDBI Bank a leading global Indian bank over time, Fairfax Financial Holdings proposes to contribute all of its interests in Go Digit Life Insurance and Go Digit General Insurance (collectively, "Digit") and all its interest in IIFL Capital Services Limited (IIFL Capital) to the Bank. In connection with the contribution transactions, Digit and IIFL Capital would be contributed to IDBI Bank at their respective market prices, all in accordance with all applicable law and regulation. As for Fairfax's 40% shareholding in CSB Bank, RBI is believed to have given Fairfax two years to decide on it. Fairfax does not expect there to be any change in the governance, management or operating structure of either Digit or IIFL Capital resulting from the proposed contribution transactions.
IDBI Bank has demonstrated remarkable turnaround performance, earning ₹9,320 crore in the 12 months ended June 2026 after incurring cumulative losses of approximately $6.4 billion between 2016 and 2020. The bank now shows a capital adequacy ratio of 27%, net worth of approximately $7.5 billion, CASA ratio of 43.6%, and net non-performing asset ratio of 0.2%. The bank maintains provisions equivalent to 99% of its non-performing loans and has a loan-to-deposit ratio of 80% with an assets-to-equity ratio of approximately seven times. Fairfax plans to retain existing managing director and CEO Rakesh Sharma, who led the turnaround, while proposing to appoint NS Kannan as chairman, subject to RBI approval. The bank's loan book has shifted towards retail lending, which now accounts for around 70% of advances.
The Department of Investment and Public Asset Management (Dipam) has directed Life Insurance Corporation of India (LIC) to reduce its stake in IDBI Bank from 19% to 15% post-divestment, as reported by The Economic Times. This reduction would increase the bank's public float by an additional 4 percentage points, making more shares available to retail investors and other public shareholders. The sale process for IDBI Bank began in 2022 and faced a setback earlier this year when initial bids fell below the government's reserve price. The deal is awaiting approval from the Reserve Bank of India, which will conduct a 'fit and proper' assessment, and the Competition Commission of India (CCI) and other statutory authorities. The government approved the sale of a 60.72% stake for approximately ₹53,000 crore to Fairfax Financial Holdings, with the Canadian billionaire Prem Watsa-led group paying ₹81 per share, higher than the benchmark fair value of ₹75.99 determined by two independent valuation agencies.
