Kotak Mahindra Bank has re-entered the race to acquire IDBI Bank, with due diligence now in its final stages. According to people familiar with the matter, the lender has intensified discussions with government advisers in recent weeks and is preparing to submit a bid.
The competition for IDBI Bank had largely narrowed to Emirates NBD and Fairfax Financial, both eyeing a controlling stake of more than 60 percent. However, Kotak Mahindra Bank’s renewed interest has made the contest more competitive. The government is expected to invite final bids by the next quarter, with the top bidder likely to be chosen before the end of the financial year.
Bidders are expected to pay between $5 and $6 billion (₹45,000 to ₹50,000 crore) for a 60.72 percent equity stake, valuing IDBI Bank at around $8 to $10 billion (₹75,000 to ₹88,000 crore). The deal would provide the winning bidder not only with a controlling stake but also 26 percent voting rights. To make the offer more attractive, the government has promised to reduce Life Insurance Corporation of India’s (LIC) voting rights in the bank, ensuring the new owner can exercise greater control.
Currently, the government holds 45.48 percent of IDBI Bank, while LIC owns 49.24 percent. Together, their stake amounts to 94.72 percent. Even after selling a combined 60.72 percent, their residual holding will remain close to 34 percent, higher than the 26 percent voting rights limit imposed by India’s banking regulations for private bank owners.
Kotak Mahindra Bank’s strong domestic franchise gives it a solid platform, while Fairfax already controls CSB Bank in India, and Emirates NBD recently received approval to set up a wholly-owned subsidiary in the country, strengthening their bids.
The government has long sought to privatise IDBI Bank, but the process was delayed due to a pending share purchase agreement. That hurdle has now been cleared, paving the way for the transaction to move forward.
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