The long-delayed privatisation of IDBI Bank is witnessing renewed activity, with a fresh contender reportedly joining the race. According to a report by NDTV Profit, Kotak Mahindra Bank has expressed interest in acquiring a significant stake in the lender. The bank now appears alongside global investment firms Oaktree Capital and Fairfax, which were already seen as active suitors in earlier phases of the process.
The NDTV Profit report highlights several challenges being examined by prospective bidders, the most significant being IDBI Bank’s sizeable market capitalisation, which is currently around Rs 1 lakh crore. Acquiring a 60 percent stake at this valuation would require large upfront capital, making it a tough deal for most investors to execute purely with cash. However, Kotak Mahindra Bank, which has a market capitalisation of about Rs 4.14 lakh crore, may evaluate a part-equity, part-cash merger structure to make the acquisition financially feasible. Such a structure would allow Kotak to utilise its equity currency as part of the consideration, easing the capital burden.
If Kotak’s interest is confirmed, it could alter the competitive landscape for IDBI Bank’s divestment. Fairfax and Oaktree have been engaged with the process for months, but the entry of a large domestic private-sector bank would introduce a new strategic dimension. Kotak, with its strong retail franchise and track record of successful integrations—most notably the ING Vysya merger—could be seen by the government as a capable steward for IDBI’s future.
Earlier this week, the government indicated that the request for proposal (RFP) for the sale will be issued soon. The Centre has repeatedly emphasised its goal of completing the privatisation by March 31, 2026. As per the current structure, the government and LIC together plan to divest 60.72 percent of their combined holdings, transferring full management control to the acquirer. Post-transaction, the government is expected to retain a 15 percent stake, while LIC’s holding will reduce to approximately 19 percent.
In the initial phase of the privatisation, Emirates NBD and Fairfax had emerged as the key suitors and even conducted extensive due diligence. However, Emirates NBD recalibrated its India ambitions after announcing a $3 billion investment to acquire a majority stake in RBL Bank, effectively ruling itself out of the IDBI bidding process. This left Fairfax as the most active suitor until Kotak’s name surfaced in the latest media report.
In a separate corporate development, Kotak Mahindra Bank announced a 5-for-1 stock split on Friday. Shareholders holding one share of face value Rs5 will receive five shares of face value Rs 1 each. The bank said the move is intended to improve retail participation and make the stock more affordable. Kotak last implemented a stock split in 2010 and later issued bonus shares in 2015. The split also coincides with the bank completing 40 years of operations.
Meanwhile, the broader privatisation process has made progress. A Reuters report recently noted that the government has completed due diligence for the stake sale and intends to invite financial bids between October and December this year. The divestment was first announced in 2022, and the reclassification of LIC from “promoter” to “public shareholder” earlier this year was seen as a critical step in clearing governance hurdles for the sale. That change strips LIC of board representation and strategic influence, aligning its role with that of a financial investor.
IDBI Bank’s shares closed at Rs 100.25 on the BSE, down 2.53 percent in Friday’s trade.
(With inputs from Reuters)
