Fairfax Financial Holdings, a Canadian firm, proposed a $5.5 billion takeover of IDBI Bank, India's state-owned lender. The deal faces opposition from the bank's employees and Indian political figures.
The United Forum of IDBI Officers and Employees called for a two-day nationwide strike against the sale. The union expressed grave concerns about the transparency of the sale and valuation process, demanding the government cancel the privatization and instead strengthen the bank while protecting public investment and employees' interests.
Rahul Gandhi, leader of India's opposition, backed the employee unions. "Public banks are not assets to be sold off, they are tools to build the nation," he said. Gandhi noted that selling over 60% of IDBI Bank to Fairfax conflicts with previous governments' commitment to maintain a 51% stake in the state-owned lender.
Nirmala Sitharaman, India's finance minister, defended the sale. She said IDBI Bank was handed to the government in poor shape and was revived through professionalism, prudence, and recapitalization of more than 250 billion rupees ($2.6 billion). "The IDBI Bank is now poised for its next phase of growth," Sitharaman said, with the government stating that growth will be driven by a strategic investor.
The Indian government announced on October 14 that the sale of over 60% of IDBI will represent the largest foreign direct investment transaction in India's financial sector. Fairfax bid 81 rupees per share against the average fair value set at 75.99 rupees. IDBI shares opened at around 79 rupees per share on Monday.
Indian media outlet Businessworld reported that government officials suppressed IDBI's valuation to make Fairfax's offer look attractive. The Ministry of Finance defended its process, saying the bidding was double blind, with the bidder not knowing the valuation and valuators not seeing the bids.
India has been divesting stakes this year including in Cochin Shipyard, Indian Railways Finance Corp, NHPC, and Coal India. In August, the government received $3.3 billion for a 6.5% stake in Life Insurance Corporation of India.