Canada’s Fairfax Buys IDBI for $5.6 Billion in India’s Biggest Bank Deal

Submission Statement: Canadian billionaire Prem Watsa’s Fairfax Financial Holdings Ltd. will acquire a stake in IDBI Bank Ltd. for 528.78 billion rupees ($5.6 billion), making it the biggest foreign investment in India’s rapidly growing financial services sector.

Fairfax Financial will own 60.72% of IDBI Bank, according to Arunish Chawla, secretary at the Department of Investment and Public Asset Management, valuing the lender at around 871 billion rupees. The sale isat a 11% discount to Wednesday’s closing price of 90.4 rupees with the Indian government and Life Insurance Corp. set to retain a total of 34% stake in the lender.

Fairfax joins a wave of foreign firms expanding in India, drawn by the burgeoning wealth class and the world’s fastest-growing major economy. Japanese lenders alone spent more than $6 billion combined, buying stakes in Indian banks last year, including deals by Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc.

The latest breakthrough in the IDBI stake sale will be seen as a shot in the arm for Modi who is seeking to convert India into a developed economy by 2047. To achieve his ambition of boosting gross domestic product 10 times to about $30 trillion by 2047, funding from banks must increase to about 130% of GDP from around 56%.

In recent months, India has also accelerated stake sales in some of its largest state-owned companies, helping push disinvestment proceeds above the total raised in each of the past three fiscal years. The government is seeking to shore up finances as the oil-importing nation faces mounting fiscal strain from the energy shock spurred by the Middle East war.

Proceeds from the IDBI Bank stake sale would provide a significant boost to the government’s goal of raising 800 billion rupees through asset sales this fiscal year.

The acquisition of India’s sixth-largest private bank by assets significantly expands Watsa-owned Fairfax’s India presence. Fairfax already has investments in CSB Bank Ltd. and shadow lender IIFL Capital Services Ltd.