Canadian firm Fairfax Financial Holdings' proposed $5.5 billion takeover of IDBI Bank is running into resistance from the Indian state-owned lender's employees and from political parties, according to reports on the transaction.
The United Forum of IDBI Officers and Employees called for a two-day nationwide strike against the sale to Fairfax, announcing the action on Sunday in a post on X. The union said it had "grave concerns" about the transparency of both the sale and the valuation process. It is demanding that the government "cancel the privatization process" and instead concentrate on strengthening the bank while safeguarding public investment and the interests of staff.
Political opposition has also gathered. Rahul Gandhi, India's leader of the opposition, voiced support last week for the IDBI employee unions fighting the takeover. In a statement on Thursday, he argued that public banks are not assets to be sold off but tools for building the nation. He added that selling more than 60% of IDBI Bank would conflict with the commitment of previous governments to retain a 51% holding in the state-owned lender.
Finance Minister Nirmala Sitharaman pushed back, saying the public sector bank had been handed to the government in poor shape and was revived through professionalism, prudence and recapitalization of more than 250 billion rupees, equivalent to about $2.6 billion. She said IDBI Bank is now poised for its next phase of growth, and the government has previously stated that this phase would be led by a strategic investor.
On Oct. 14, the government said the sale of over 60% of IDBI would represent the largest foreign direct investment transaction in India's financial sector. Fairfax bid 81 rupees per share, against an average fair value set at 75.99 rupees per share. IDBI shares opened at around 79 rupees on Monday.
The valuation itself has become a point of contention. Indian media outlet Businessworld reported on Thursday that government officials had suppressed IDBI's valuation to make Fairfax's offer appear attractive. The Ministry of Finance defended its procedure, stating that the bidding process was run "double blind", meaning the bidder did not know the valuation and the valuators did not see the bids.
The IDBI transaction comes as the Indian government divests stakes in state assets to keep the country's growth engine running amid deepening fiscal pressures. It has sold shares in several companies this year, including Cochin Shipyard, Indian Railways Finance Corp, NHPC and Coal India. In August, it raised $3.3 billion for a 6.5% stake in Life Insurance Corporation of India, the country's top life insurer.
Sources: CNBC Markets.