IDBI Bank acquisition draws criticism amid labor and political concerns

The United Forum of IDBI Officers and Employees initiated a two-day nationwide strike beginning Sunday to protest the sale to Fairfax. The union voiced worries regarding the openness of the sale and valuation, expressing their demands on X. They are urging the government to halt the privatization and instead bolster the bank while safeguarding public investments and employee positions.

Rahul Gandhi, leader of the opposition in India, voiced his support for the IDBI Bank employee unions last week. “Public banks are not assets to be sold off, they are tools to build the nation,” Gandhi stated. He emphasized that the proposed sale of over 60% of IDBI Bank’s shares to Fairfax contradicts previous government commitments to maintain a 51% stake in state-owned lenders.

Finance Minister Nirmala Sitharaman responded by stating that the bank was previously in a weakened state and has been revitalized through professional management, careful financial practices, and over 250 billion rupees ($2.6 billion) in recapitalization. She asserted that IDBI Bank is now ready for a new phase of growth, which will be fueled by a strategic investor.

The Indian government announced on October 14th that the sale of more than 60% of IDBI’s shares will represent the largest foreign direct investment in India’s financial sector to date. Fairfax’s bid involves paying 81 rupees per share, exceeding the average fair value of 75.99 rupees.

Shares of IDBI Bank began trading on Monday at approximately 79 rupees per share.

Reports from Businessworld, an Indian media outlet, allege that government officials deliberately understated IDBI’s valuation to make Fairfax’s offer appear more appealing. The Ministry of Finance has defended its procedures, describing the bidding process as “double blind,” ensuring neither the bidder nor the valuators had full visibility into the process.

This divestment aligns with the Indian government’s broader strategy this year to generate revenue amidst ongoing fiscal challenges. The government has already sold stakes in various entities, including Cochin Shipyard, Indian Railways Finance Corp, NHPC, and Coal India. In August, they secured $3.3 billion through the sale of a 6.5% stake in Life Insurance Corporation of India.