The government is exploring various options to resolve the imbroglio over the plan to privatise IDBI Bank, including allowing the two existing bidders in the stalled auction process to improve their offers. This move follows the realisation that restarting the entire sale process would take several years to complete.
The IDBI Bank stake sale, initiated in March 2021, effectively halted in mid-March 2026 after financial bids opened because both bidders had submitted offers significantly below the reserve price set for selling the 60.72% stake in the lender. Sources had earlier indicated that the reserve price was pegged at around Rs 90,000 crore.
While four entities were shortlisted, only two, including Fairfax Financial Holdings, are understood to have submitted financial bids. However, there has been no official communication regarding this.
Valuation Mismatch
In strategic disinvestments, the reserve price—determined confidentially by the Inter-Ministerial Valuation Committee (IMVC) based on independent assessments by the transaction adviser and valuer—serves as the minimum acceptable bid.
Given the time and effort already invested in the IDBI Bank sale process, there is a strong view within the government that all available options should be explored to revive the transaction, including engaging with bidders to enhance their offers, sources said. Several review meetings have been held to assess the way forward, though a final decision is yet to be taken, they said. The legal tenability of letting the bidders make revised offers is being examined.
On February 6 this year, the Department of Investment and Public Asset Management (DIPAM) received financial bids for a 60.72% stake in IDBI Bank—comprising 30.48% held by the government and 30.24% by LIC—along with management control.
Macro Headwinds
At the time the bids were submitted, IDBI Bank had a market capitalisation of around Rs 1.15 lakh crore, with its shares trading at Rs 106.92 on the BSE. By May 29, the stock had fallen to Rs 73.78, reducing its market value to about `79,331 crore, partly reflecting broader market weakness linked to the West Asia conflict.
Senior government officials have repeatedly underscored the government’s intent to exit the lender, which is effectively a private-sector bank, as government ownership is below 51%. Currently, LIC holds 49.23% and the government 45.48%. Public shareholding in IDBI Bank currently stands at just 5.29%.
If the government decides to proceed with the current sale process, it would provide a significant boost to its FY27 target of mobilising Rs 80,000 crore through disinvestment and asset monetisation.