IDBI Bank stake sale row: What triggered questions over valuation and Fairfax's bid & what the govt says

The government has defended the process used to sell a majority stake in IDBI Bank, saying the reserve price was neither raised nor lowered during the second round of bidding.

In a clarification issued on Thursday, the Department of Investment and Public Asset Management (DIPAM) said the initial bidding round was conducted in 2025-26 under indicative guidelines that allowed flexibility to ensure the successful completion of strategic disinvestment within a time-bound manner.

DIPAM said the initial bids were not approved because they fell below the reserve price and the bidders declined to match that price.

The Core Group of Secretaries on Disinvestment (CGD), empowered by the Cabinet Committee on Economic Affairs (CCEA) to address procedural issues and deviations, subsequently determined the process for inviting the best offers.

"The reserve price was neither decreased, nor increased, and the first round itself became functus officio after the initial bids were not approved," the department said.

How the controversy unfolded

The clarification follows questions over the valuation process for the proposed sale to Fairfax Financial.

According to the Businessworld report, the government initially set a reserve price of ₹94.42 per share. Bids opened on March 12, 2026, fell below that level, and both bidders refused to match the price.

The report said Fairfax submitted a revised offer on June 1, which was opened on July 13, following which the CGD ordered fresh valuations.

The report questioned why officials opened the revised bid before ordering a new valuation, rather than establishing the benchmark independently before seeing the offer.

DIPAM said there was no prescribed internal procedure within the department for handling a situation in which the highest financial bid fell below the reserve price.

“The CCEA has empowered the CGD to remove all difficulties, including deviations from procedure, to ensure effective implementation of the strategic disinvestment transactions approved by the CCEA,” it added.

Why the valuation method matters

The BW report also questioned changes to the methods used to value IDBI Bank.

One method involved comparing the bank with other listed lenders. According to the report, officials directed valuers to use public sector banks as comparators and exclude private sector banks.

The report argued that this could lower the valuation because private sector banks generally command higher market valuations.

It also noted that the Reserve Bank of India (RBI) has treated IDBI Bank as a private bank for regulatory purposes since 2019.

DIPAM said IDBI Bank remained overwhelmingly owned by the government and Life Insurance Corporation of India (LIC), even after the RBI began treating it as a private bank for regulatory purposes.

“... and the market investors continued to value it as a public sector entity,” it said.

Questions over valuation benchmark

The revised valuation benchmark was ₹75.99 rupees per share, according to the report.

Fairfax's approved offer of ₹81 was therefore about 6.6% higher.

The report questioned whether the new benchmark was influenced by the decision to exclude private sector banks and change other valuation assumptions after the revised bid had been opened.

The government said the valuation methodology was reviewed in April 2026, before it invited revised offers.

Since the valuation benchmark had to be contemporaneous with the bids, independent valuation agencies began working on revised assessments in May after the financial accounts for the year ended March 31, 2026, became publicly available in late April, it said.

DIPAM asserted that the process remained “double blind” since the bidder did not know the valuation and the valuators did not see the bids.

“It is only the CGD which gets to see a complete picture and compares the bids with fair valuations to take a final call on the reasonableness of the bids submitted,” it added.

The department also defended its decision to exclude IDBI Bank's stock price from the valuation, reiterating that the volatility in the shares tended to “misalign valuation with the intrinsic value of the enterprise.”