Fairfax to Buy 60.72% Stake in IDBI Bank for $5.6 Billion, India's Biggest Bank Deal

Fairfax Financial has agreed to acquire a controlling stake in IDBI Bank for roughly 528.78 billion rupees, or about $5.6 billion, in what is being called the biggest bank deal in India's history and the largest foreign investment to date in the country's financial services sector. Under the terms of the agreement, Fairfax will end up holding 60.72 percent of IDBI, a stake that values the Mumbai based lender at around 871 billion rupees.

Fairfax has offered 81 rupees a share for IDBI, above the 75.99 rupee benchmark price the government set based on independent valuations, though the offer still sits at an 11 percent discount to the stock's closing price of 90.4 rupees on Wednesday. The Indian government and Life Insurance Corporation, which currently hold the bulk of IDBI between them, are set to retain a combined 34 percent stake in the bank once the deal closes.

The sale caps a long running effort by New Delhi to exit IDBI, which the government took control of in 2019 after the bank ran up heavy loan losses. Offloading the stake has been part of Prime Minister Narendra Modi's broader push to draw more private capital into India's banking sector, a process that has moved in fits and starts as the government worked through valuation and ownership questions before settling on Fairfax as the buyer.

Fairfax, the Canadian insurer and asset manager led by billionaire Prem Watsa, has built a track record of taking stakes in distressed lenders, including earlier bets in Ireland and Greece as well as prior investments in India, then working to repair their balance sheets and grow fee generating businesses such as wealth management. The IDBI deal extends that playbook to what is now the firm's largest single banking bet in the country.