Fairfax buys controlling stake in India’s IDBI Bank for $5.6-billion

Value investor Fairfax Financial Holdings Ltd. is taking on another bank turnaround by acquiring control of India’s IDBI Bank for US$5.6-bilion, the largest foreign investment ever made in the south Asian country’s financial service sector.

Toronto-based Fairfax is buying a 60.72 per cent stake in IDBI Bank from the government of India, according to a press release on Wednesday from the federal Department of Investment and Public Asset Management.

IDBI ranks among the 10 largest banks in India by market capitalization and top 15 by assets.

The Indian government took control of Mumbai-based IDBI in 2019 after it ran up significant loan losses. The government has been trying to sell its stake for several years as part of Prime Minister Narendra Modi’s strategy to attract more private capital to the banking sector.

Fairfax and the government of India announced the deal as Canada’s federal Minister of International Trade Maninder Sidhu leads a trade mission in India.

Fairfax, an asset manager and insurer led by billionaire Prem Watsa, has previously made significant profits by taking stakes in troubled banks in Ireland, Greece and India, then fixing their balance sheets and expanding their services in fee-generating sectors such wealth management.

In 2018, Fairfax bought a stake in CSB Bank Ltd., which is also based in India. Government regulations on the IDBI investment require Fairfax to either merge or exit its 40-per-cent stake in CSB Bank over the next two years.

CSB Bank is a relatively small, regional lender that ranks outside India’s top 20 banks by assets and market capitalization.