“The first or initial bid round was conducted in the financial year 2025-26 by DIPAM as per its internal practices developed over a period of time, which are in the nature of indicative guidelines and not hidebound rules or regulations.”
The ministry maintained that the guidelines allowed procedural modifications to ensure complex strategic transactions could be completed without wasting time and resources.
“The foreword itself states that the procedure suggested is not to be construed as a rigid, legal framework, which may require due adaptation/modification in the best interest of successful execution of the transaction in a time-bound manner,” the ministry said. “Given the complex nature of strategic transactions, the indicative guidelines give flexibility to ensure cost and time spent in lengthy processes is not wasted.”
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It also clarified that there was no predetermined benchmark for financial bids. While bidders independently determined their offers, external valuation agencies assessed the enterprise to establish a comparison for evaluating those bids.
The ministry cited a provision in the Request for Proposal (RFP) allowing the government to decide the next course of action if the highest financial bid was below the reserve price. “In the event the Financial Bid of the Highest Bidder is lower than the reserve price, the Gol will decide the further course of action and the QIPs shall not subsequently question any decision taken by the Gol in this regard.”
The ministry said there was no procedure prescribed to handle this situation internally within DIPAM and special powers had been delegated to the Core Group of Secretaries on Disinvestment (CGD) by the Cabinet Committee of Economic Affairs (CCEA) for this purpose.
It said the CGD was empowered by a 2017 Cabinet Committee on Economic Affairs decision to address procedural difficulties and approve deviations where necessary.
Exercising these powers, the CGD determined the procedure for the second, or best-offer, round after the initial bids were not approved. “The reserve price was neither decreased, nor increased, and the first round itself became functus officio after the initial bids were not approved,” the ministry said.
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How was IDBI Bank valued?
According to the ministry, the CGD reviewed the valuation methodology in April 2026, before inviting best-offer bids. Independent agencies began preparing revised valuations in May, following the publication of IDBI Bank’s March 2026 financial accounts.
The ministry said the process remained double-blind, with bidders unaware of the valuations and valuers unable to see the bids. Only the CGD had access to both sets of information for the final assessment.
Two independent advisers used separate methodologies. The business valuation relied on the market multiple method, using listed public sector banks as comparable companies because suitable comparable transactions were unavailable.
The ministry explained that although the Reserve Bank of India began treating IDBI Bank as a private bank for regulatory purposes after LIC acquired a majority stake in 2019, investors continued to value it as a public sector entity.
Govt says bid value increased by Rs 3,917 crore
The ministry also defended the treatment of disputed tax demands in the asset valuation process, saying indemnity provisions had been introduced following requests from qualified bidders.
It said the potential liability was limited to Rs 627 crore, while the resulting bid price increased by Rs 3,917 crore, improving the transaction value for the government and LIC.
The ministry maintained that the tax liability was a low-probability event and would be revenue-neutral for the government, as reimbursement would apply only if an additional tax demand was actually paid.
It also reiterated that IDBI Bank’s volatile share price, affected by narrow trading volumes, was not considered an appropriate valuation benchmark.
The government and LIC would retain residual shareholdings, allowing them to benefit from any future increase in IDBI Bank’s value following the strategic restructuring, the ministry said.
On October 14, the government approved the sale of a 60.72% stake in IDBI Bank to Fairfax for Rs 52,878 crore.
The clarification comes amid reports questioning the valuation and bidding process for IDBI Bank’s stake sale to Fairfax. The government had initially fixed a reserve price of Rs 94.42 per share and rejected bids that fell below it. In the subsequent round, Fairfax’s offer of Rs 81 per share was accepted.
