IDBI Bank shares in focus as Q2 net profit falls 39%; NII tanks nearly 50% YoY

ETMarkets.com

The Cabinet has approved the strategic sale and restructuring of IDBI Bank, with Canada's Fairfax Financial Holdings selected as the winning bidder.

The bank said that Q2FY26 profit included a one-off gain of Rs 1,699 crore from the sale of its strategic investment in NSDL, according to a filing with the exchange. Excluding this gain, net profit and operating profit for Q2FY27 increased 14% and 59% YoY, respectively.

Net interest income (NII) fell 49% YoY to Rs 1,353 crore from Rs 2,489 crore in the corresponding quarter last year, but rose 31% sequentially. Net interest margin (NIM) improved by 50 basis points quarter-on-quarter and 40 basis points year-on-year to 4.11%.

The bank's asset quality improved, with the gross non-performing asset (NPA) ratio declining to 2.12% as of September 30, 2026, from 2.65% a year earlier. The net NPA ratio also fell to 0.17% from 0.21%. Its provision coverage ratio, including technical write-offs, stood at 99.24% as of September 30, 2026, remaining above 99% since September 2023.

Total deposits grew 17% YoY to Rs 3.55 lakh crore as of September 30, 2026, compared with Rs 3.03 lakh crore a year earlier. Current account and savings account (CASA) deposits rose 12% to Rs 1.55 lakh crore from Rs 1.38 lakh crore, taking the CASA ratio to 43.82%.

Net advances increased 18% YoY to Rs 2.71 lakh crore as of September 30, 2026, against Rs 2.30 lakh crore in the year-ago period. The bank's gross advances portfolio had a corporate-to-retail composition of 31:69.

Fairfax-IDBI deal

The Cabinet has approved the strategic sale and restructuring of IDBI Bank, with Canada's Fairfax Financial Holdings selected as the winning bidder for a 60.72% stake worth Rs 52,878.08 crore. The transaction is set to become India's largest foreign direct investment (FDI) deal in the financial services sector.

The stake on offer comprises 30.48% held by the Government of India and 30.24% owned by LIC. Fairfax's winning bid of Rs 81 per share was higher than the independently determined benchmark valuation of Rs 75.99 per share. An earlier bidding round failed after offers fell below the reserve price of Rs 94.42 per share, prompting the government to invite fresh best-offer bids from qualified bidders.

After the transaction, the government will retain a 15% stake in the lender, while LIC will hold 19%, taking their combined shareholding to 34%. The government has also authorised the Alternative Mechanism to sell portions of its remaining stake through the open market in future. LIC will manage its residual holding in line with regulatory requirements.

The strategic sale follows a privatisation process that stretched over several years and involved a two-stage competitive bidding framework.