IDBI Bank shares fall 7% as investors book profit after Fairfax deal gets cabinet nod

IDBI Bank shares fell 7% after a sharp 13% rise the previous day. This kind of reversal can happen when investors sell some holdings after a strong jump. The decline does not necessarily mean the Fairfax deal has weakened.

The rally had taken the stock to Rs 93.60 on Wednesday. It also pushed IDBI Bank’s market capitalisation above Rs 1 lakh crore. After such a rapid move, some investors may choose to lock in gains. The article describes Thursday’s decline as looking more like investors taking money off the table.

The underlying transaction remained in progress. The Cabinet had approved the sale of the government’s and LIC’s combined stake to Fairfax Financial Holdings’ subsidiary for Rs 52,878.08 crore. Fairfax still needed regulatory approvals, including the RBI’s fit-and-proper assessment. The fall therefore appeared to be short-term profit-taking after excitement around the approval.

The Cabinet approved the sale of the Indian government’s and LIC’s combined stake in IDBI Bank. The buyer is M/s 10955230 Canada Inc., a subsidiary of Fairfax Financial Holdings. This approval moves the bank’s long-discussed privatisation closer to completion.

The transaction is valued at Rs 52,878.08 crore. Fairfax’s bid was Rs 81 per share, above the average fair valuation of Rs 75.99 set by two independent professional valuation agencies. The government and LIC are therefore selling their combined holding to the Fairfax subsidiary rather than retaining control of that portion.

The approval does not immediately complete the deal. The successful bidder must pass the RBI’s fit-and-proper assessment and obtain other regulatory approvals. After completion, the government will retain 15% and LIC will retain 19%. The deal is expected to be the largest foreign direct investment in India’s financial sector.

The Fairfax transaction is valued at Rs 52,878.08 crore. Its scale is significant because Union Minister Ashwini Vaishnaw expects it to become the largest foreign direct investment in India’s financial sector. It also places IDBI Bank at the centre of efforts to bring private and foreign capital into banking.

The government will retain 15% of IDBI Bank after the transaction. LIC will hold 19%. Since the government and LIC are selling their combined stake, Fairfax’s subsidiary would receive the remaining 66% based on those stated holdings and a 100% total ownership structure.

The stake changes control, but completion still depends on regulatory conditions. Fairfax’s successful bid must pass the RBI’s fit-and-proper assessment and receive other approvals. The bank’s next challenge will be using this new ownership to become more competitive in private banking, while building on its repaired balance sheet and improved business performance.

Cabinet approval is an important milestone, but it is not the final step. Fairfax’s subsidiary, M/s 10955230 Canada Inc., must complete the regulatory process before the IDBI Bank transaction can close. These checks are designed to assess whether the successful bidder is suitable to own and control the bank.

The article specifically names the RBI’s fit-and-proper assessment. Fairfax must also obtain other regulatory approvals. Until these conditions are met, the ownership transfer is not complete, even though the government and LIC have agreed to sell their combined stake for Rs 52,878.08 crore.

After approval and completion, the government is expected to retain 15% and LIC 19%, leaving Fairfax with the sold controlling stake. The next business challenge will then be strategic rather than procedural: making IDBI Bank more competitive in private banking. The bank has already repaired its balance sheet, but its future depends on how Fairfax develops it.

Fairfax’s offer was considered attractive because it exceeded the independent valuation of IDBI Bank’s shares. The buyer offered Rs 81 per share, while two independent professional valuation agencies arrived at an average fair value of Rs 75.99. The difference indicated a stronger price than the assessed average.

The offer was Rs 5.01 above the independent valuation. In percentage terms, that is roughly a 6.6% premium over Rs 75.99. This gave the government and LIC a bid priced above the valuation benchmark used for the transaction, helping support the sale decision.

The higher offer also helped mark a turning point for IDBI Bank after years of financial stress. However, the price alone does not finish the deal. Fairfax’s subsidiary must still pass the RBI’s fit-and-proper assessment and secure other regulatory approvals. Once completed, Fairfax will need to turn the bank’s financial recovery into stronger private-sector competitiveness.

Non-performing assets are loans that are no longer performing properly. IDBI Bank’s falling gross and net NPA ratios show how dramatically its loan problems reduced. Gross NPAs declined from 31.78% in September 2018 to 2.32% in March 2026. Net NPAs fell from 17.30% to 0.15% over the same period.

The figures show improvement in both the overall pool of troubled loans and the bad-loan exposure remaining after provisions. A gross NPA ratio near one-third once signalled severe stress. By March 2026, the gross ratio was much lower. The net ratio of 0.15% indicated very little remaining net problem-loan exposure.

This recovery was also visible in profits and business growth. IDBI Bank reported Rs 9,513 crore in net profit in FY26. Its total business rose 18% year-on-year to Rs 6.27 lakh crore. These gains helped create a stronger base for privatisation, although Fairfax must now make the lender more competitive.

A bank takes deposits from customers and uses its balance sheet to provide loans and other advances. It earns income from this business. Healthier loans matter because fewer troubled assets reduce losses and financial stress. That leaves more capacity to support customers and compete with other banks.

IDBI Bank’s figures illustrate the mechanism. Deposits rose 17% to Rs 3.56 lakh crore, giving the bank a larger funding base. Net advances grew 18% to Rs 2.72 lakh crore, showing more money deployed as loans after adjustments. Total business reached Rs 6.27 lakh crore, while net profit was Rs 9,513 crore in FY26.

These improvements matter because growth is more useful when loan quality is strong. IDBI Bank’s gross NPA ratio fell to 2.32% and net NPAs to 0.15% by March 2026. The bank now has a healthier platform, but Fairfax must turn that recovery into stronger private-banking competitiveness.