Government may consider OFS option to increase public float in IDBI Bank

The government may consider selling stake in IDBI Bank through the offer-for-sale (OFS) route to increase public shareholding after an unsuccessful attempt to sell stake in the LIC-controlled lender, sources said.

Currently, the public float in IDBI Bank is only 5.29 percent, which limits the scope for fair valuation.

The remaining shares are held by insurance behemoth Life Insurance Corporation of India (LIC), which has a controlling stake of 49.24 percent, while the Government of India (GoI) holds 45.48 percent.

Earlier this month, the proposed sale of the 60.72 per cent majority stake jointly held by the government and LIC was called off after the financial bids of two potential buyers allegedly fell below the reserve price.

A low free float limits the scope for reasonable markup and extending this to 10 per cent or 15 per cent would make price discovery more reliable, sources said.

It can provide a reliable benchmark for valuation and make the price discovery process more transparent, they said, adding that strategic sales can be pursued even after one or two rounds of OFS.

As per the failed plan, both the government and LIC were to offload 30.48 per cent and 30.24 per cent stake respectively.

This is the second time the government wants to privatize IDBI Bank after the first announcement in 2016. The idea was first officially flagged in February 2016 by then Finance Minister Arun Jaitley in the Union Budget speech.

The first attempt to privatize the then state-owned IDBI Bank failed due to valuation concerns.

However, the government later sold the controlling stake to LIC, which was looking at acquiring a stake in the bank to expand its bancassurance business model.

Subsequently, in January 2019, LIC as part of the disinvestment process to bail out the lender from heavy bad loans of around Rs. Acquired 51 percent controlling stake in IDBI Bank for Rs 21,624 crore.

As a result, the bank was classified as a private sector bank by the Reserve Bank of India.

In December 2020, the lender was reclassified as an associate company following the reduction of LIC’s stake in the bank to 49.24 percent.

The process for privatization got a formal boost when the Cabinet Committee on Economic Affairs gave its in-principle approval for the strategic disinvestment along with the transfer of management control to IDBI Bank in May 2021.

In October 2022, KPMG India was appointed as the transaction advisor and announced its intention to sell 60.72 percent stake in the bank.

The Department of Investment and Public Asset Management (DIPAM) invited Expressions of Interest (EoI) in October 2022 and market regulator Sebi approved the reclassification of GOI as a public shareholder after completion of the sale in January 2023.

Later in August 2025, the regulator approved the reclassification of LIC as a public shareholder after the sale was completed and after a long struggle, financial bids from the two Emirates NBD Bank and Prem Wats-promoted Fairfax India were finally received in February 2026.