Fairfax Financial Holdings Ltd. is considering selling its entire stake in mid-sized Indian shadow lender IIFL Finance Ltd., as the Canadian firm seeks to partly fund its proposed acquisition of IDBI Bank Ltd., according to people familiar with the matter.
Fairfax, founded by Indian-born Canadian billionaire Prem Watsa, is holding talks with global private equity firms for a potential sale, the people said, asking not to be named discussing private matters. The plans are preliminary and could be subject to change, they added. Fairfax held 15.2% stake in IIFL Finance as on June 30, according to Bloomberg compiled data. The Indian firm has a current market value of $2.98 billion.
Fairfax's move underscores how it is gearing up to acquire a 60.7% stake in IDBI Bank in a sweetened offer that Indian authorities are close to accepting, people have previously said. A successful bid for the Mumbai-based lender could be valued at $6.2 billion at current prices, potentially making it the biggest foreign investment in the country's banking sector.
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There was no immediate response from Fairfax and IIFL Finance to email queries sent by Bloomberg News.
The stake being pitched to global investment companies comes at a time when India's financial services industry has become a target for acquisitions. Buyers are drawn by the growing flow of household savings into formal investments, rising credit demand and the opportunity to scale in a rapidly digitizing market, though regulations often complicate deals. Last year, Blackstone Inc. invested more than $700 million for a 9.9% stake in Federal Bank.
If Fairfax acquires IDBI Bank, it is expected to consolidate some of its existing Indian investments in lending firms in line with regulatory rules, according to the people. Fairfax also owns a 40% stake in small private-sector lender CSB Bank Ltd.
In May, Fairfax's India unit agreed to raise its stake to become the majority owner in IIFL Capital Services Ltd., a capital markets and wealth management firm. Fairfax plans to bring IIFL Capital under its wholly owned subsidiary after it acquires IDBI Bank, the people said.
The Indian subsidiary recently brought ‌capital into the country ahead of Fairfax's potential deal to acquire IDBI Bank, Reuters reported in June.
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