After getting approval to acquire a 60.72 stake in IDBI Bank for Rs 52,878 crore, the biggest foreign direct investment in India’s financial sector, Canada-based Fairfax Financial Holdings announced that it plans to combine Go Digit, its insurance business and IIFL Capital, its wealth and investment banking arm, as subsidiaries of IDBI Bank, aiming to make the lender into a holistic financial services provider.
Why Fairfax Wants To Combine Go Digit And IIFL Into IDBI Bank
To comply with the Reserve Bank of India (RBI) guideline, which states that a single promoter entity should not control or run more than one bank at the same time, Prem Watsa’s investment firm plans to merge its controlling stakes in Digit Insurance and IIFL Capital Services into IDBI Bank.
The RBI has to approve both the transaction of the stake acquisition in IDBI Bank. Meanwhile, the decision to combine IIFL Capital and Go Digit will also require the nods of the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority of India (IRDAI), respectively.
Who Is Prem Watsa?
Indian origin Prem Watsa, who was born in Hyderabad in 1950, is the founder, chairman, and CEO of Fairfax Financial Holdings. He is known as the “Warren Buffett of Canada,”. Watsa built his global financial empire after moving to Canada. He studied engineering at IIT and earned an MBA from the University of Western Ontario while funding his studies through door-to-door sales.
Also Read: Government Approves IDBI Bank Sale To Fairfax: All You Need To Know About Rs 52,878 Cr Deal
IDBI Bank- Fairfax Rs 52,878 Cr Deal Explained: Biggest FDI In Finance Sector
The Cabinet on Wednesday approved the sale of a 60.72 per cent stake in IDBI Bank to Fairfax Financial Holdings for Rs 52,878 crore, ending a highly anticipated process that has stretched over five years. The IDBI Bank’s disinvestment becomes the country's biggest strategic stake sale since the sale of Air India.
Information and Broadcasting Minister Ashwini Vaishnaw, while addressing reporters, said that the government and LIC will together hold a 34 per cent stake in the restructured entity, while offloading a 60.72 per cent stake.
With this, the government’s stake in the bank will fall to 15 per cent from 45.5 per cent. At the same time, LIC’s holding will be reduced to 19 per cent from 49.2 per cent.
"Once completed, this will be the largest FDI in the financial sector of our economy so far," the government said in a statement.
The decision, which was taken by the Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, has potentially opened a new chapter in the privatisation of state-controlled banks, showing the government's efforts to attract private capital into the financial sector.