Prem Watsa, Emirates NBD In Final Race For IDBI Bank — Profit Exclusive

Canadian investor Prem Watsa and Emirates NBD are the two bidders remaining in fray to bid for IDBI Bank, two people in the know confirmed. The two bidders will get access to the virtual data room in the next few weeks, after which they will formulate a final bid for the bank, these people added, speaking on conditions of anonymity.

As part of the bidding strategy, Watsa is looking to create a special structure which may or may not involve his investment vehicle Fairfax Financial Holdings. This is to avoid excess taxation and an immediate merger between IDBI Bank and CSB Bank. Fairfax Financial owns 40% equity stake in CSB Bank currently.

If approved, the new structure will hold IDBI Bank and work on its turnaround. Once the bank's financials have reached appropriate levels, the promoters will merge it with CSB Bank, according to the people quoted above. The merger between the two lenders is a key requirement for Watsa to be eligible for the bid.

The talks of this special structure are still in early stages and a final decision has not been taken, the people quoted above said.

Emirates NBD will need to incorporate an Indian subsidiary to be eligible for the bid, the people quoted above said.

As the race for IDBI Bank gears up, Kotak Mahindra Bank seems to have taken a step back, the people quoted above said. This is because the private sector lender is in the process of resolving challenges in its technology platform, after Reserve Bank of India barred it from onboarding new customers through digital means. The regulator also barred Kotak Mahindra Bank from issuing fresh credit cards in April.

The government is looking to close the IDBI Bank sale process early next financial year, with bids expected to come in by March. The IDBI Bank sale process has been an ongoing process for the government and has seen significant delays since it was first announced.

RBI had granted fit and proper approvals to Prem Watsa and Emirates NBD in July. In January, the government said that it had received expressions of interest from multiple bidders, as part of the IDBI Bank divestment process. The government and Life Insurance Corp. have placed 60.72% stake in IDBI Bank on sale, under this process.

In the quarter ended September 30, IDBI Bank reported a net profit of Rs 1,836 crore, up 39% year-on-year. Total advances were up 19% at Rs 2 lakh crore, while total deposits were up 11% at Rs 2.77 lakh crore. Gross non-performing asset ratio stood at 3.68%, while net NPA was at 0.2%.