Restarting IDBI Bank sale was futile, says DIPAM chief on Rs 52,878-crore deal: Report
Defending the government's decision to seek improved offers rather than cancelling the transaction or accepting initial bids, DIPAM Secretary Arunish Chawla clarified that the reserve price for the bank was never altered after the opening round.
- Nov 6, 2026,
- Updated Nov 6, 2026 7:41 AM IST
Scrapping the IDBI Bank strategic sale and restarting the process from scratch would have been a futile exercise with a "very, very remote" chance of finding another buyer willing to pay nearly Rs 50,000 crore, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said.
Defending the government's decision to seek improved offers rather than cancelling the transaction or accepting initial bids, Chawla clarified that the reserve price for the bank was never altered after the opening round. "The reserve price was neither increased nor decreased nor refixed. It became functus officio with the end of the first round," Chawla said in an exclusive interview with Moneycontrol.
Following the initial round of bidding, the Cabinet Group of Secretaries on Disinvestment (CGD) weighed three distinct options: scrapping the process to start afresh, accepting the initial bid-discovered price, or asking qualified bidders to raise their offers.
The CGD ultimately chose the third path. Abandoning the transaction would have wasted years of investor engagement, particularly given the narrow field of eligible buyers capable of meeting the Reserve Bank of India’s (RBI) strict fit-and-proper criteria. Transaction advisers warned that securing another buyer for the government and Life Insurance Corporation of India's (LIC) stake at the Rs 50,000-crore mark was extremely difficult, the Moneycontrol report added.
Explaining why accepting the first-round bids was also evaluated, Chawla added that strategic disinvestments do not operate like standard reserve-price auctions. Bidders determine their own valuations, which are then measured against independent fair-value assessments.
"It is wrong to say that bid price below the reserve price cannot be approved," he told Moneycontrol, highlighting the privatisation of Paradeep Phosphates, where a bid 15% below the reserve price was accepted, leading to a successful turnaround.
To maximise value for the government and LIC, the CGD pursued improved offers. A critical catalyst was adding disputed income-tax demands to the indemnity list — a common request from suitors. Chawla noted that potential reimbursement liability was capped at ₹627 crore and would trigger only if the tax demand was paid and qualified for reimbursement.
Describing the tax liability as a low-probability, revenue-neutral event, Chawla said, "The nudge worked." The move helped push the bid-discovered price up by Rs 3,917 crore.
During the revised process, both qualified bidders received a simultaneous opportunity to enhance their bids. While the top bidder significantly raised its price, the second-ranked bidder stated in writing that its initial submission was its best and final offer. Satisfied with the substantial increase, the CGD proceeded.
The winning bid of Rs 81 per share places the total transaction value at Rs 52,878 crore, marking a 56% premium over IDBI Bank’s book value of Rs 51.85 per share as of March 31, 2026.
Chawla also countered critiques regarding the timeline of the revised valuation. The CGD initiated the updated framework in April 2026, while independent valuation agencies started their work in May, right after the March 31, 2026 financial results were made public on April 30.
The deal now awaits final regulatory clearance. The RBI is currently reviewing the winning bidder's source of funds and verifying compliance with fit-and-proper norms. The entire Rs 52,878-crore consideration must be settled in cash using the bidder's own resources, completely distinct from IDBI Bank's capital.
Post-sale, the government and LIC will hold a combined residual stake of approximately one-third, retaining upside potential in future value creation. Terming the transaction "a reform in continuum," Chawla stressed that a strategic owner will bring enhanced management practices, integrated banking services, and modern technology to the institution.
Scrapping the IDBI Bank strategic sale and restarting the process from scratch would have been a futile exercise with a "very, very remote" chance of finding another buyer willing to pay nearly Rs 50,000 crore, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said.
Defending the government's decision to seek improved offers rather than cancelling the transaction or accepting initial bids, Chawla clarified that the reserve price for the bank was never altered after the opening round. "The reserve price was neither increased nor decreased nor refixed. It became functus officio with the end of the first round," Chawla said in an exclusive interview with Moneycontrol.
Following the initial round of bidding, the Cabinet Group of Secretaries on Disinvestment (CGD) weighed three distinct options: scrapping the process to start afresh, accepting the initial bid-discovered price, or asking qualified bidders to raise their offers.
The CGD ultimately chose the third path. Abandoning the transaction would have wasted years of investor engagement, particularly given the narrow field of eligible buyers capable of meeting the Reserve Bank of India’s (RBI) strict fit-and-proper criteria. Transaction advisers warned that securing another buyer for the government and Life Insurance Corporation of India's (LIC) stake at the Rs 50,000-crore mark was extremely difficult, the Moneycontrol report added.
Explaining why accepting the first-round bids was also evaluated, Chawla added that strategic disinvestments do not operate like standard reserve-price auctions. Bidders determine their own valuations, which are then measured against independent fair-value assessments.
"It is wrong to say that bid price below the reserve price cannot be approved," he told Moneycontrol, highlighting the privatisation of Paradeep Phosphates, where a bid 15% below the reserve price was accepted, leading to a successful turnaround.
To maximise value for the government and LIC, the CGD pursued improved offers. A critical catalyst was adding disputed income-tax demands to the indemnity list — a common request from suitors. Chawla noted that potential reimbursement liability was capped at ₹627 crore and would trigger only if the tax demand was paid and qualified for reimbursement.
Describing the tax liability as a low-probability, revenue-neutral event, Chawla said, "The nudge worked." The move helped push the bid-discovered price up by Rs 3,917 crore.
During the revised process, both qualified bidders received a simultaneous opportunity to enhance their bids. While the top bidder significantly raised its price, the second-ranked bidder stated in writing that its initial submission was its best and final offer. Satisfied with the substantial increase, the CGD proceeded.
The winning bid of Rs 81 per share places the total transaction value at Rs 52,878 crore, marking a 56% premium over IDBI Bank’s book value of Rs 51.85 per share as of March 31, 2026.
Chawla also countered critiques regarding the timeline of the revised valuation. The CGD initiated the updated framework in April 2026, while independent valuation agencies started their work in May, right after the March 31, 2026 financial results were made public on April 30.
The deal now awaits final regulatory clearance. The RBI is currently reviewing the winning bidder's source of funds and verifying compliance with fit-and-proper norms. The entire Rs 52,878-crore consideration must be settled in cash using the bidder's own resources, completely distinct from IDBI Bank's capital.
Post-sale, the government and LIC will hold a combined residual stake of approximately one-third, retaining upside potential in future value creation. Terming the transaction "a reform in continuum," Chawla stressed that a strategic owner will bring enhanced management practices, integrated banking services, and modern technology to the institution.