SCAM ALERT: Rules Inverted, Valuations Slashed: Inside the ₹81-a-Share Deal that Handed IDBI Bank to Fairfax
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In an unusual departure from established disinvestment protocols, government officials altered core valuation procedures, discarded a higher reserve price, and handed tax indemnities to seal the sale of IDBI Bank toPrem Watsa-led Fairfax Financial at ₹81 per share, BusinessWorld Broke the story which claims to have possession of internal documents of the deal.
An internal 10-page note of the Department of Investment and Public Asset Management (DIPAM), dated August 13, 2026, details how standard safeguards designed to protect public assets were dismantled after initial financial bids failed to meet the government's baseline expectations.
From Stalled Bids to Rewritten Rules
The transaction hit a roadblock on March 12, 2026, when first-round financial bids were opened. Both bids fell well short of the government’s initial reserve price of ₹94.42 per share, and both bidders refused to match the benchmark.
Rather than scuttling the process or issuing a fresh Expression of Interest (EoI) to invite open market competition, officials opted to keep the dialogue open. On June 1, 2026, Fairfax Financial submitted a revised, sealed offer.
When government officials opened Fairfax’s revised bid on July 13, 2026, the Core Group of Secretaries on Disinvestment (CGD) moved swiftly. On the very same day, the CGD declared that the earlier benchmark price "cannot be reused and should be discarded" and ordered fresh valuation reports.
By October 2026, the Union Cabinet gave its final approval for the deal at ₹81 per share, pointing to newly commissioned valuation reports that pegged the revised benchmark price down to ₹75.99 per share.
Abandoning the Blind Reserve Price
Standard guidelines outlined in DIPAM's own Indicative Booklet on Strategic Disinvestment strictly mandate that government officials must fix reserve prices blindly, without prior knowledge of incoming financial bids, to prevent price-tailoring.
The internal DIPAM note acknowledges that this core rule was abandoned after the first round of bidding failed, paving the way for a post-bid recalibration of the bank's worth.
Valuation Parameters Restructured
To arrive at the lower ₹75.99 benchmark, the valuation methodology was significantly reworked:
- Market Price Omitted: High prevailing stock market prices for IDBI Bank were set aside, with officials citing market volatility.
- Private Banks Excluded from Comparison: Valuation agencies KPMG India and BDO Valuation Advisory LLP were specifically instructed to benchmark IDBI Bank solely against Public Sector Banks (PSBs). The internal note admitted that benchmarking against higher-valued private sector peers would result in an "over-estimated reserve price."
- Fixed Asset Limits: The asset valuer was issued specific instructions regarding point estimates, placing strict caps on intangible assets such as brand value.
Taxpayer Indemnity and the Take-it-or-Leave-it Offer
Beyond lowering the price threshold, the government granted significant concessions to secure the deal. Officials agreed to indemnify Fairfax against all pending disputed income tax demands against IDBI Bank, shifting potential financial liabilities directly onto Indian taxpayers.
The decision was driven in part by a strict condition set by the buyer. Fairfax attached an ultimatum to its offer, stating it would withdraw entirely if asked to rebid or increase its price. Faced with the choice of restarting the privatisation exercise from scratch or accepting the single active offer, the government chose to lock in the ₹81-per-share deal.
