Fairfax may tap IDBI bank’s excess capital to help fund ₹52,878 crore buyout

Fairfax Financial Holdings could use IDBI Bank's funds to partially finance its proposed acquisition of the lender, according to a BW Businessworld report. The arrangement raises questions about valuation, regulatory approvals and the interests of minority shareholders. The report, authored by journalist Palak Shah, is based on the full transcript of Fairfax's investor conference call on 15 October. It says company executives indicated that IDBI Bank could use its surplus capital to buy Fairfax's holdings in Go Digit General Insurance, Go Digit Life Insurance and IIFL Capital. The proceeds could then become part of Fairfax's funding plan for the deal.

Fairfax has agreed to buy a 60.72 per cent stake in IDBI Bank from the government and the Life Insurance Corporation of India (LIC) for Rs 52,878 crore, or Rs 81 per share.

What Fairfax said…

BW Businessworld reported that Fairfax chairman and founder Prem Watsa told analysts that IDBI Bank could pay for the businesses in cash. Responding to a Raymond James analyst on the proposed Go Digit transfer, he reportedly said there was excess capital at the bank and that it would pay cash "at market prices" at the time of the deal.

Watsa earlier listed Fairfax's funding sources for the acquisition: cash in hand, dividends from its insurance businesses, possible asset sales, and contributions from Go Digit and IIFL Capital at their market prices.

Fairfax president Peter Clarke put the acquisition's cost at $5.6 billion. He said the contribution from Digit Insurance, including its life arm, and IIFL Capital could be worth about $3 billion, or over half the cost. BW Businessworld calculated this at roughly Rs 28,300 crore at the exchange rate implied by the deal price.

Open questions

The report asks whether Fairfax is funding the purchase wholly from its own resources, or expects the bank to contribute substantially once it takes control. It noted that no final structure has been decided and no binding agreements have been signed. Fairfax has also said the acquisition can go ahead even if the Digit and IIFL Capital contributions do not materialise.

On valuation, Go Digit General Insurance and IIFL Capital have market prices. Go Digit Life Insurance is unlisted, so its market value is not publicly available.

BW Businessworld also pointed to Reserve Bank of India (RBI) rules from 2025. A bank's equity investment in any single subsidiary or financial services company cannot exceed 10 per cent of its paid-up capital and reserves, and its aggregate investment in such firms is capped at 20 per cent. The investments would need prior RBI approval, and whether the limits apply would depend on the final structure. Fairfax has said the contributions would also need clearance from the Securities and Exchange Board of India (SEBI) and, for Digit, the Insurance Regulatory and Development Authority of India (IRDAI).

IDBI Bank's capital position

IDBI Bank's capital adequacy ratio was 27.10 per cent on 30 September 2026, well above the regulatory minimum of 11.5 per cent, including the capital conservation buffer. The report noted, however, that the bank rebuilt its finances with government and LIC support after heavy losses between 2016 and 2020. Watsa acknowledged on the call that these losses were about $6.4 billion and were funded by LIC and the government. This, the report said, has prompted questions over using the bank's excess capital to buy businesses owned by its prospective controlling shareholder.