Govt May Explore OFS Route To Increase Public Shareholding In IDBI Bank

The government is likely to look at the offer-for-sale (OFS) route to increase public shareholding in IDBI Bank after its earlier attempt to sell a majority stake did not go through.

At present, the bank has a very low public float of just about 5.29%, which limits active participation from investors and can affect price discovery in the stock.

A large portion of the IDBI Bank’s shares continues to be held by the Life Insurance Corporation of India and the government. LIC owns around 49.24%, while the Government of India holds close to 45.48%. This leaves only a small portion available for public trading.

Why Is OFS Being Considered?

Sources close to the matter believe floating an OFS offer could help improve how the IDBI stock is valued in the market. With more shares available for trading, there is usually better liquidity and more accurate pricing.

An OFS could be done in phases, possibly increasing the public float by 10–15% over time. This may create a more stable base for valuation before any future strategic sale is considered again.

The earlier plan involved selling a combined 60.72% stake, jointly held by the government and LIC. However, that process was dropped after the financial bids received were reportedly below expectations.

A Long Privatisation Journey

The government is making a second attempt to privatise IDBI Bank, after the first plan announced in 2016 did not go through due to valuation concerns.

In 2019, LIC stepped in and acquired a 51% stake for about ₹21,624 crore. The move was aimed at stabilising the bank, which was dealing with high bad loans. Following this, the Reserve Bank of India classified it as a private-sector bank.

The current privatisation process picked up pace in May 2021 after in-principle approval from the government. By October 2022, advisors were appointed and plans were set to sell a 60.72% stake.

After a long due diligence phase, financial bids were received in February 2026 from Emirates NBD Bank and Fairfax India.

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What Happens Next?

Officials believe that improving the public float first may make the next round of stake sale smoother. A higher level of public participation could also provide a clearer market benchmark for the bank’s valuation.

An OFS, if it goes ahead, may not replace the privatisation plan. It could serve as a stopgap. The government can still look at a strategic sale later, when market conditions improve.

Sources:

The Economic Times

The Hindu Business Line