Fairfax IDBI Bank takeover faces labour and political resistance in India

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Fairfax IDBI takeover resistance

Highlights

The Indian government approved selling a 60.72% stake in IDBI Bank to Fairfax Financial Holdings for about 530 billion rupees ($5.59 billion) on October 14.
Labour union UFIOE continues its nationwide strike, challenging valuation methods and urging the government to retain over 51% ownership to protect public and employee interests.
Political opposition, including Rahul Gandhi, demands an independent probe into the sale, alleging undervaluation, while the finance ministry denies wrongdoing in the process.

Sale terms and objections to valuation

As reported by Reuters, the Indian government approved on Oct. 14 the sale of a 60.72% stake in IDBI Bank to Fairfax Financial Holdings for about 530 billion rupees, or roughly $5.59 billion. Under the transaction, the government and Life Insurance Corporation of India, LIC, are set to sell a little more than 60% of the lender to Fairfax.

The United Forum of IDBI Officers and Employees, UFIOE, continues a nationwide strike for a second day on Tuesday, calling on the government to stop the sale. Union representatives argue that authorities have taken inconsistent positions on IDBI Bank's status during the process, treating it as a private sector bank for regulation and court rulings while comparing it with public sector banks for valuation.

Devidas Tuljapurkar, convenor of UFIOE, questions the methodology used to determine the bank's value. In India, state-owned banks typically trade at lower valuations than private lenders, and the union is urging the government to abandon the privatisation plan, raise its holding above 51% and protect public investment and employee interests.

Political pressure and scrutiny of the stake sale

The proposed takeover is also drawing political opposition. Last week, opposition leader Rahul Gandhi backed the protesting employees and opposed transferring control of the bank to Fairfax, saying public banks are tools for nation-building rather than assets to be sold.

Finance Minister Nirmala Sitharaman is defending the decision, saying IDBI Bank was left financially weak after years of lending to large corporate groups under previous administrations. She says the lender was later revived through professionalism, prudence and recapitalisation of more than 250 billion rupees.

Pressure on the government is also increasing from the Unorganised Workers and Employees Congress, the labour wing of the opposition Congress Party, which wrote to Sitharaman on Monday seeking an independent investigation into the sale and warning of legal action if that demand is not met.

Local media reported last week that officials understated IDBI Bank's valuation to make Fairfax's offer look more attractive. The finance ministry rejects that allegation, saying the Core Group of Secretaries on Disinvestment reviewed the valuation methodology, while Reuters says it could not independently verify the report or determine whether the process deviated from prescribed rules.

Our earlier article on India’s disinvestment programme explained that most proceeds since FY2016 have come from market-based routes such as ETFs, public issues and buybacks, while strategic sales transferring management control have played a much smaller role. It highlighted why the proposed IDBI Bank stake sale to Fairfax stands out, as the deal value would exceed the combined value of many recent strategic sales and could materially improve the government’s chances of meeting its annual disinvestment target.

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