Canada's Fairfax buys majority stake in IDBI Bank
What's the story
Canada's Fairfax Financial Holdings is acquiring a controlling stake in IDBI Bank. The deal, worth ₹52,878 crore ($5.47 billion), has been approved by the Indian government. Under the agreement, Fairfax will pay ₹81 per share of IDBI Bank. The government and state-run Life Insurance Corporation of India (LIC) will together sell their 60.72% stake in the lender to Canada Inc, the parent entity of Fairfax Financial Holdings.
Restructuring
Government to divest 30.48% stake in IDBI Bank
The Union Cabinet has approved the strategic restructuring of IDBI Bank. The government will divest a 30.48% stake while LIC will sell its 30.24% stake in the bank. Post-restructuring, both entities will hold a combined 34% stake in the restructured entity.
Agreement terms
Key conditions of the deal
The share purchase agreement stipulates that the invested capital will be locked in for three years.
IDBI Bank will continue to operate under its existing brand name.
LIC is also required to cut its stake in IDBI Bank to 15% within two years, as per Reserve Bank of India (RBI) norms.
The DIPAM secretary said the share purchase agreement is expected to be executed before this calendar year ends.
Compliance requirements
Canada Inc will have to present its credentials to RBI
Canada Inc. has to present its credentials to RBI under 'fit and proper' assessment at the Expression of Interest (EoI) stage.
It will also have to submit a roadmap for compliance with regulatory conditions.
The asset valuation method considered both tangible and intangible assets, including land and properties.
As per RBI norms, Canada Inc will decide whether to merge CSB Bank with IDBI Bank or divest its stake in CSB Bank within two years of executing the share purchase agreement.