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Government Eyes Offer-for-Sale for IDBI Bank Stake
22 Mar
Summary
- Government explores Offer-for-Sale for IDBI Bank to boost public shareholding.
- Previous 60.72% stake sale attempt failed as bids fell short of reserve price.
- Low free float was identified as a barrier to fair market valuation.
The Indian government is exploring an Offer-for-Sale (OFS) strategy to divest its stake in IDBI Bank, following the unsuccessful auction of a majority stake earlier this year. This approach aims to increase the public float, which currently stands at a low 5.29%, a factor identified as hindering fair market valuation. The previous divestment plan, involving a joint sale of 60.72% by the government and LIC, was scrapped in February 2026 when financial bids from Emirates NBD Bank and Fairfax India fell short of the set reserve price.
The government and LIC, holding 45.48% and 49.24% respectively, had planned to offload significant stakes. This privatization attempt marks the second significant effort since 2016, with the first attempt failing due to valuation concerns. LIC had acquired a controlling 51% stake in IDBI Bank in January 2019 for Rs 21,624 crore to aid the bank's recovery from bad loans, leading to its reclassification as a private sector bank by the RBI.
In May 2021, the Cabinet Committee on Economic Affairs approved the strategic disinvestment. KPMG India was appointed as the Transaction Advisor in October 2022, with DIPAM inviting Expressions of Interest. Sebi approved the reclassification of GOI as a public shareholder in January 2023, and LIC's reclassification followed in August 2025, paving the way for the bids received in February 2026. The OFS route is seen as a way to establish a reliable valuation benchmark and enhance price discovery transparency, with strategic sales potentially pursued after initial OFS tranches.
