IDBI Bank: Time to walk alone?

IDBI Bank , a private sector bank which is majorly owned by the Life Insurance Corporation of India (LIC) , is once again at the cusp of possibly, a lonely journey ahead.

IDBI Bank’s privatisation plan – which was in progress for five years – hit a roadblock last week. The bids for a controlling stake in the Bank from potential bidders, were lower than the valuation expectations of the government.

Investor interest in the bank’s stock has faded, sliding 28% in the past five days to ₹74.2 on March 17, from ₹103 on March 11 at the BSE. The stock is trading at 1.16 times its book value.

“The [Bank] is a good franchise but one must put into context the price one wants to pay for the bank. The size of the bank will involve a very skilled execution from a potential buyer," says an analyst with an equity research firm on condition of anonymity. Also, India’s experience with the merger or buyout of a public sector bank has not been easy. In this case, changing the work culture of IDBI Bank, would not be a task.

The government of India planned to divest 30.3% of its 45.5% stake in IDBI Bank and LIC (the promoter with management control) 30.4% of its 49.24% stake for a combined 60.72% stake strategic sale. After the stake sale is completed, the two entities were expected to continue to hold a combined 34% in the bank.

But bids from the two interested parties – Fairfax Financial Holdings and Dubai-headquartered Emirates NBD Bank – were not found favourable. Also, both these bidders hold stakes in other banks: Fairfax in CSB Bank and Emirates NBD Bank, a proposed stake in RBL Bank.

The asset quality for the bank stands improved. The gross non-performing assets (GNPA) ratio for the bank (as a percentage of total advances) has improved to 2.57% as of December-end 2025, from 13.82% as of December-end 2022 and 21.25% in March-end 2017. More importantly, the net NPA ratio has improved to 0.18%, from 1.07% and 13.21% in the corresponding periods.

“IDBI Bank commands a strong deposit franchise with CASA ratio of around 44%. This has an inherent value in the current environment where sourcing low-cost deposits is one of the most challenging tasks for banks. IDBI Bank also has demonstrated strong improvement in asset quality over the years and is delivering healthy profitability and growth,” says Nitin Aggarwal, head of BFSI Research at Motilal Oswal Institutional Equities.

“Due to the market turbulence, the valuations were not in expectation with that of the government. They did not want any dilution in the price. At some point it is a disinvestment target. But to fly from here, IDBI Bank will need a different pace of acceleration,” Kranthi Bathini, director of equity strategy at WealthMills Securities.