New Delhi

Thegovernment and Life Insurance Corporation of India (LIC) intend to remain public shareholders in IDBI Bank after the proposed strategic sale to Canada's Fairfax Financial Holdings, with their individual stakes capped at 15 per cent and no representation on the bank's board, DIPAM Secretary Arunish Chawla said.

“Both the Government of India and LIC want to become public shareholders. To become public shareholders, you cannot hold more than 15 per cent equity. You also cannot sit on the board,” he said.

The Securities and Exchange Board of India has directed LIC to reduce its post-dilution stake from 19 per cent to 15 per cent, increasing the bank's public float by four percentage points.

Last week, the government approved the sale of a combined 60.72 per cent stake in IDBI Bank to Fairfax for about Rs 53,000 crore ($5.5 billion), marking a major step in India's long-delayed banking privatisation drive.

Fairfax will acquire the government's 30.48 per cent stake, valued at about Rs 26,620 crore, and LIC's 30.24 per cent holding, valued at around Rs 26,440 crore.

The Canadian billionaire Prem Watsa-led company will pay Rs 81 per share, above the benchmark fair value of Rs 75.99 determined by two independent valuation agencies.

Following the strategic restructuring, responsibility for running the bank and infusing capital when required will rest with Fairfax, Chawla said.

The transaction is expected to be completed by the end of the current financial year, subject to regulatory clearances from the Reserve Bank of India (RBI). Fairfax will submit the required technical papers and credentials to the RBI. Once approval is secured, the share purchase agreement will be signed.

The strategic buyer will also be required to make an open offer to minority shareholders, giving them an opportunity to tender their shares under applicable regulations.