Fairfax India Holdings, the investment arm of Indian-origin Canadian billionaire Prem Watsa, seen as one of the top contenders for IDBI Bank, could now be in the back seat — thanks to the ongoing geopolitical spat between India and Canada. Highly placed sources say with the political tension not easing anytime soon, Fairfax’s is unlikely to be at an advantageous position to secure IDBI Bank in the ongoing divestment process. “If the tension between the two countries escalates or doesn’t end soon, Fairfax may lose its edge in the process,” the source said.

If this turns out to be the case, it is understood that Kotak Mahindra Bank and NBD Emirates may have a better chance in succeeding the divestment process for IDBI Bank.

In March 2022, businessline reported that Prem Watsa-led Fairfax has shown interest in the bank, and in April 2023, about Kotak Mahindra Bank’s interest.

Dicey for Fairfax?

Fairfax India Holding is an arm of Canada’s Fairfax Financial Holdings Limited and IDBI Bank, being an Indian incorporated entity, would require go-aheads from both the countries for the investment to fructify, since there is a voluminous amount of foreign exchange outflow and inflow involved in the investment process.

What could also complicate the matter is the Government of India’s stake in IDBI Bank, although for practical purposes IDBI Bank is classified as a private bank. Of the 60.7 per cent of IDBI Bank shares offered for divestment, the government’s share is 30.48 per cent, while Life Insurance Corporation of India (LIC) would be selling 30.24 per cent stake. Post the divestment, Government and LIC would hold 15 per cent and 19 per cent stake in the bank, respectively.

That said, a few people aware of the development say one shouldn’t take out Watsa from the list of potential contenders just yet. Apparently, Watsa has been keen to acquire IDBI Bank ever since the government revealed its intention to divest stake in the bank back in 2020. “Fairfax is one of the early birds in signalling the firm’s interest to acquire the bank. “They (Fairfax) would want to explore every possibility to ensure that they are on he right of the bidding process,” said a senior banker aware of the development.

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NBD Emirates’ likely entry

Currently operating as a branch office in India, NBD Emirates is also among the three contenders for IDBI Bank. Sources in the know say that the foreign bank has expressed interest in IDBI Bank from its headquarters. Though it doesn’t operate through a subsidiary route unlike DSB Bank India or State Bank of Mauritius, which may have brightened its prospects for the Indian lender, sources in the know suggest that it would barely be an impediment in the bidding process. “There are strong bilateral ties between India and UAE which could be tapped if NBD can offer a good valuation for IDBI Bank,” said one of the sources quoted above.

Deal intact

Amidst talks of delay in the divestment of IDBI Bank, people close to the development say the process is very much intact and the sale may conclude before March 31, 2024. While the bidding timelines for appointment of asset valuers has been extended from October 9-10 to October 30-31, it is gathered that the delay is more due to change in clauses pertaining to the bidding process based on suggestions received from potential bidders.

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