Key Points
- Government and LIC plan to sell combined 60.72% stake (30.48% from government, 30.24% from LIC) in IDBI Bank worth approximately $7.1 billion (₹64,000 crore)
- Formal bidding process expected to launch in December 2025, with financial bids anticipated this month
- Three major contenders qualified: Kotak Mahindra Bank (led by Uday Kotak), Emirates NBD, and Fairfax Financial Holdings
- Government aims to complete disinvestment by March 2026 (end of FY26), though approvals may extend timeline
- IDBI Bank shares have surged approximately 30% in 2025, pushing market capitalization above ₹1 trillion ($11.6 billion)
- Deal includes management control and 26% voting rights, with government promising to reduce LIC’s voting rights post-sale
- Bidders expected to pay $5-6 billion for the stake, valuing IDBI Bank between $8-10 billion
The Indian government is preparing to auction its majority stake in IDBI Bank Limited, marking a landmark moment in India’s banking privatization efforts. The combined stake of 60.72% comprising 30.48% from the Government of India and 30.24% from Life Insurance Corporation (LIC) is valued at approximately $7.1 billion (₹64,000 crore) based on current market valuations. According to sources familiar with the matter, a government agency could formally launch the bidding process as early as December 2025, with all preparations for the auction nearly complete.
The Cabinet Committee on Economic Affairs (CCEA) granted in-principle approval for this strategic disinvestment in May 2021, and the process has been progressing steadily since then. Ministry of State for Finance informed Parliament this week that shortlisted bidders are currently undergoing due diligence, and the government expects to complete the disinvestment by the fiscal year ending March 2026. However, regulatory approvals and other clearances may extend the timeline beyond the March 2026 announcement of the winning bidder.
IDBI Bank’s Remarkable Turnaround
Once a heavily indebted institution plagued by non-performing assets, IDBI Bank has undergone a dramatic transformation in recent years. Following extensive reforms and substantial capital infusions, the bank has returned to strong profitability with a significant reduction in NPAs. This turnaround has made IDBI Bank an attractive acquisition target, with the government and LIC currently holding more than 94% of the bank’s equity 45.48% by the government and 49.24% by LIC.
The deal structure has been designed to attract serious buyers, offering not just a controlling stake but also 26% voting rights to the successful bidder. To sweeten the deal further, the government has committed to reducing LIC’s voting rights post-sale, ensuring the new owner can exercise meaningful control despite Indian banking regulations that limit voting rights to 26% for all private bank owners.
Three-Way Race: Kotak, Emirates NBD, and Fairfax
The competition for IDBI Bank has intensified with three qualified bidders in the final stages. Uday Kotak’s Kotak Mahindra Bank has emerged as a frontrunner, having recently intensified discussions with government advisers as the due diligence process enters its final stages. However, sources indicate that Kotak will not seek an inflated price for the acquisition. If successful, the merger could significantly expand Kotak Mahindra Bank’s size and strengthen its position in the Indian banking sector.
Canadian billionaire Prem Watsa’s Fairfax Financial Holdings, which already controls CSB Bank in India, represents another strong contender with established experience in the Indian banking space. Emirates NBD, one of the Middle East’s largest lenders, has also expressed serious interest and recently received regulatory clearance for establishing a wholly-owned subsidiary in India, potentially strengthening its bid. All three companies have passed the Expression of Interest stage and completed the RBI’s provisional fit and proper assessment.
Market Response and Valuation
Investor anticipation surrounding the privatization has driven IDBI Bank shares up approximately 30% in 2025, with the stock surging 9% in a single day following positive disinvestment updates in August. This rally has pushed the bank’s market capitalization beyond ₹1 trillion ($11.6 billion). Bidders are expected to pay between $5-6 billion (₹45-50,000 crore) for the 60.72% equity stake, implying a total valuation of $8-10 billion (₹75-88,000 crore) for IDBI Bank.
Historic Privatization Milestone
If completed successfully, this transaction will represent the first major privatization of a public sector bank in India in decades, setting a crucial precedent for the government’s broader PSU disinvestment agenda. The government has targeted ₹47,000 crore in asset monetization for FY26, having already raised ₹22,000 crore in the first quarter. Beyond IDBI Bank, the government is also planning to rationalize its holdings in other PSUs, bringing stakes down to 90% for entities where it holds over 90%, and to 75% for those with 75-90% government ownership.
