FILE PHOTO: IDBI Bank in New Delhi
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Proposed disinvestment of IDBI Bank could trigger a mandatory open offer by Canada-based Fairfax Holdings, although there may not yet be any proposal before the Department of Investment and Public Asset Management (DIPAM) to require one. “To the best of my knowledge, there is no proposal for asking Fairfax to come up with an open offer,” EAS Sarma, former Secretary to the Government of India, told businessline.Automatic triggerThe Government and Life Insurance Corporation of India (LIC) plan to sell a combined 60.72 per cent stake in IDBI Bank. The Government proposes to sell 30.48 per cent of its 45.48 per cent holding, while LIC plans to offload 30.24 per cent of its 49.24 per cent stake. Under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, acquisition of a 60.72 per cent stake would automatically trigger a mandatory open offer. Fairfax would consequently be legally required to offer to buy at least another 26 per cent from IDBI Bank’s public shareholders at the finalised deal price.Low reserve priceSarma has been trenchantly critical of the disinvestment, citing an “unconscionably low” reserve price, among others, and a process that he says is highly non-transparent and non-competitive. He has raised his objections in a series of letters to Finance Minister Nirmala Sitharaman. “If the government remains obstinate and goes ahead with the proposed sale of equity holding, it would be unfair not only to the public but also to lakhs of LIC’s policyholders who have a stake in it indirectly,” he pointed out in his latest letter. ‘Scam-like’ transaction“I am afraid the proposed sale would raise concerns of a scam-like transaction, reminding one of a similar exercise of disinvestment of another CPSE, Central Electronics Ltd, which the Centre had to hurriedly abort to its embarrassment.” Sarma said the concerns extend beyond valuation to foreign ownership and banking-control rules. Referring to RBI guidelines of August 29, 2011, he said aggregate non-resident shareholding through FDI, NRIs and FIIs in new private-sector banks cannot exceed 49 per cent for the first five years from the date of licensing. He argued that this requirement appears to be violated in the proposed IDBI disinvestment.Double ownershipSarma also flagged a conflict of interest arising from Fairfax’s existing banking presence in India. Fairfax has acquired a majority stake in CSB Bank. In his view, the only contender for IDBI therefore already controls another Indian bank, whereas it has been a well-established policy of the banking regulator not to permit the same promoter to control two banks simultaneously. “If therefore DIPAM considers disinvesting IDBI in favour of Fairfax, the deal will stand ab initio invalid.” He also questioned DIPAM’s decision to exclude Indian CPSEs from bidding while not excluding entities controlled by foreign governments and other foreign entities. Such exclusion, he said, is discriminatory. Valuation, assets, staffSarma reiterated that the Government is rushing to sell IDBI equity at a price far below its potential market value, particularly when the bank owns land and buildings in prime urban locations across the country. If IDBI were to slip into private hands, he argued, such lands should revert to the Government; otherwise, it would amount to outright violation of a statutory provision. The bid documents, he said, make no mention of this.He also cited Section 5(1) of the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, which, in his interpretation, provides an assurance that IDBI employees’ service conditions cannot be altered. The terms of disinvestment spelt out by DIPAM, he said, violate that provision. IDBI could also claim additional value for human resources and the value generated through participation in development schemes undertaken on behalf of the Government.Counter productivePrivatisation would permanently end SC/ST/OBC reservations and welfare benefits associated with a public-sector institution, creating uncertainty for about 9,500 employees from disadvantaged sections. The workforce also includes 6,911 women and 884 differently abled employees. The Government, Sarma said, cannot brush aside their concerns. It should instead strengthen IDBI and enable it to fulfil its role as a development finance institution. Disinvestment of CPSEs to raise fiscal resources is “futile and counter-productive,” he added.Sarma also said the decision breaches a Parliamentary assurance given by the then Finance Minister in December 2003, and questioned the treatment of minority shareholders in the proposed deal. Referring to IDBI Bank’s July 14, 2026 disclosure to the NSE, he said neither the bank nor its shareholders were aware of DIPAM’s proposal. “Should not small shareholders have been taken into confidence?,” he wondered. More Like ThisPublished on September 6, 2026
