Prem Watsa, chairman and chief executive officer of Fairfax Financial Holdings, said the acquisition represented a rare opportunity to build a major financial institution in one of the world’s fastest-growing economies.
Mumbai: Fairfax Financial Holdings, owned by Indian born Canadial billionaire Prem Watsa, plans to combine its interests in Go Digit Life Insurance, Go Digit General Insurance and IIFL Capital Services with IDBI Bank as part of an ambitious strategy to transform the lender into a leading global Indian bank headquartered in India.
Fairfax, which has been selected by the Government of India as the buyer of its 60.72% stake in IDBI Bank, said the proposed integration would create a unified financial services group spanning banking, general and life insurance, investment banking and wealth management.
After taking over IDBI Bank, Fairfax expects that the operations of the newly combined company would continue to be led by Rakesh Sharma, the current managing director and CEO.
Fairfax also plans to include in the leadership group for IDBI Bank C. VR. Rajendran, the former CEO of CSB Bank, as well as N. S. Kannan, the former MD and CEO of ICICI Prudential Life Insurance and CFO of ICICI Bank, who will act as chairman, all subject to approval of the Reserve Bank of India.
N. S. Kannan, chairman-designate, IDBI Bank
The current leadership team at Digit, led by Kamesh Goyal, would remain in place and continue to be responsible for Digit’s strategy and execution, and the management team of IIFL Capital, led by R. Venkataraman, Vasudev Jagannath and Nemkumar.
He would continue to execute on its plan to serve as a leading platform for capital market services in India, encompassing institutional equities, investment banking, wealth and asset management, and mutual fund distribution.
The proposed transfer of Fairfax’s interests in the two Digit insurance companies and its holding in IIFL Capital to IDBI Bank will require regulatory approvals, including that of the Reserve Bank of India (RBI).
Prem Watsa, chairman and chief executive officer of Fairfax Financial Holdings, said the acquisition represented a rare opportunity to build a major financial institution in one of the world’s fastest-growing economies.
“We are committed to building the world’s finest financial institution from India,” Watsa said, thanking Prime Minister Narendra Modi and his team for conducting a transparent and competitive process to select the buyer.
He said the proposed combination of IDBI Bank, Digit and IIFL Capital would position the group to benefit from India’s economic growth while providing consumers and businesses with a wider range of financial services.
Fairfax believes the integrated entity could play a significant role in expanding India’s credit-to-GDP ratio by combining banking services with insurance, investment banking and wealth management under one umbrella.
Watsa said the initiative aligned with India’s ambition to become a developed economy by 2047 and achieve a GDP of more than $30 trillion.
The proposed structure would enable IDBI Bank to offer customers banking products alongside insurance policies through Digit and investment banking and wealth management services through IIFL Capital.
Fairfax expects India’s bank assets and deposits to continue growing, creating opportunities for a revitalised IDBI Bank to expand its market presence through the combined financial services platform.
The company said the proposed integration could generate long-term benefits for Indian consumers and businesses, as well as IDBI Bank, Digit, IIFL Capital and Fairfax.
Fairfax currently expects the purchase price for the purchase transaction to be satisfied through a combination of cash on hand or otherwise available to Fairfax through existing credit sources and potential asset sales.
In connection with the contribution transactions, Digit and IIFL Capital would be contributed to IDBI Bank at their respective market prices, all in accordance with all applicable law and regulation.
In addition to the approval of the RBI and all other necessary legal and regulatory approvals, each of the contribution transactions will be subject to the review and the approval of the Securities and Exchange Board of India, and the Digit Contribution will be subject to the approval of the Insurance Regulatory and Development Authority of India.
“We are very excited about the prospect of combining Digit with IDBI Bank as it would significantly strengthen Digit’s distribution footprint, allowing us to continue our growth and service offerings for the benefit of all Indians,” said Kamesh Goyal, founder and chairman of Digit.
“This partnership would create a unique opportunity for IIFL Capital to accelerate growth across investment banking, institutional equities, wealth and asset management,” said Nirmal Jain, Founder of IIFL Group.
“By combining our capital markets expertise with the scale and customer reach of a leading bank, we can bring a broader range of investment and wealth solutions to millions of customers. Given the significant under-penetration of wealth and asset management in India, we believe this combined platform would be exceptionally well positioned for long-term growth,” he said.