Low Public Float in IDBI Bank Drives Potential OFS Consideration

Government May Explore OFS Route to Raise Public Shareholding in IDBI Bank​

New Delhi, March 22: The government is considering selling a stake in IDBI Bank through the Offer-for-Sale (OFS) route to increase public shareholding, following an unsuccessful attempt to divest its stake in the LIC-controlled lender, according to sources.

Low Public Float Seen as Key Constraint​

At present, IDBI Bank’s public shareholding stands at just 5.29 percent, which limits effective price discovery and fair market valuation. The majority of shares remain concentrated with Life Insurance Corporation of India (LIC) and the Government of India.

LIC holds a controlling stake of 49.24 percent, while the government owns 45.48 percent in the bank.

OFS Likely to Improve Valuation Transparency​

Sources indicated that increasing the public float by 10 percent to 15 percent through one or more OFS tranches could significantly improve valuation benchmarks. A higher free float is expected to make the price discovery process more transparent and reliable.

They added that a strategic stake sale could still be pursued after executing one or two OFS rounds.

Earlier Stake Sale Plan Failed to Attract Adequate Bids​

Earlier this month, the proposed sale of a 60.72 percent stake in IDBI Bank, jointly held by the government and LIC, was called off after financial bids from two interested parties reportedly fell short of the reserve price.

Under that plan, the government and LIC were to offload 30.48 percent and 30.24 percent stakes respectively.

Long-Running Privatisation Efforts​

This marks the second major attempt by the government to privatise IDBI Bank since the idea was first proposed in 2016 by then Finance Minister Arun Jaitley in the Union Budget.

The initial privatisation effort did not materialise due to valuation concerns. Subsequently, LIC stepped in and acquired a 51 percent controlling stake in January 2019 for around Rs 21,624 crore as part of a rescue plan for the lender, which was burdened with high bad loans.

Following this, the Reserve Bank of India classified IDBI Bank as a private-sector bank.

Regulatory and Strategic Developments​

In December 2020, LIC’s stake in IDBI Bank was reduced to 49.24 percent, leading to its reclassification as an associate company.

The privatisation process gained traction in May 2021 when the Cabinet Committee on Economic Affairs granted in-principle approval for strategic disinvestment along with transfer of management control.

In October 2022, KPMG India was appointed as the transaction advisor, and the government formally announced plans to sell a 60.72 percent stake.

The Department of Investment and Public Asset Management invited Expressions of Interest in October 2022. Subsequently, market regulator Sebi approved the reclassification of the government as a public shareholder upon completion of the sale in January 2023.

In August 2025, Sebi also approved the reclassification of LIC as a public shareholder after completion of the proposed transaction.

Bidding Process and Latest Developments​

After an extended due diligence process, financial bids were received in February 2026 from Emirates NBD Bank and Prem Vatsa-promoted Fairfax India. However, the bids did not meet the expected valuation, leading to the scrapping of the stake sale plan.

The government is now evaluating alternative routes, including the OFS mechanism, to move forward with its disinvestment strategy in IDBI Bank while addressing valuation challenges.