IDBI Bank shares rise on $5 billion Fairfax bid report; why CSB Bank stock tumbled 5%

IDBI Bank Ltd shares rose marginally on Thursday, while CSB Bank Ltd shares tumbled 5 per cent, after a media report suggested that Fairfax, led by investor Prem Watsa, had submitted a $5 billion bid for IDBI Bank and offered to fully divest its stake in CSB Bank as part of the process. At 10.30 am, IDBI Bank Ltd shares were up 0.77 per cent at Rs 87.62. CSB Bank, on the other hand, fell 5.03 per cent to hit a low of Rs 326.50. 

As per a Moneycontrol report, Fairfax has extended a commitment that IDBI Bank will be its only investment in the banking space, fully divesting its 40 per cent stake in CSB Bank upon the acquisition of IDBI Bank. This would result help comply with RBI’s norms which mandate that a promoter cannot hold two banking licenses.

Quoting sources, Moneycontrol reported that the deal is likely to fetch about Rs 50,000 crore or just over $5 billion for the two main shareholders, government, and LIC. 

Faifax may have quoted a per share bid price of approximately Rs 77. This implies a premium of 1.2 times price to book multiples based on 12-months trailing numbers, not very different from current multiples of 1.3 times price to book at which IDBI Bank is trading on stock exchanges, the report added.

The stock was earlier in report amid buzz over the government's strategic stake sale in the bank. Hopes were high that the government may soon come up with a strategic sale plan for the lender, especially after back-to-back offer for sales (OFSes) announced recently. 

But the lender later issued a clarification over the price movement, saying there was no undisclosed or price sensitive information or any impending announcement, which needs to be informed to the exchange at this point of time. 

Reports earlier that the government was open to seeking fresh financial bids for the strategic disinvestment of IDBI Bank. It was also seeking revised financial bids from the two entities that had already bid for the stake, reports suggested. Fairfax Financial Holdings Ltd and Emirates NBD were the two likely bidders for the IDBI Bank privatisation, but the bids came in at a price well below the reserve price. 

IDBI Bank was rescued by LIC in 2019, following a surge in bad loans, making its eventual privatisation a key test case for broader banking sector reforms. The government holds a 45.48 per cent stake in the bank, along with Life Insurance Corporation of India, which owned 49.24 per cent. The plan is to jointly divest a majority 60.7 per cent stake, reports suggested.