Evaluate the valuation approach (market multiple and asset valuation) used in the IDBI Bank transaction in light of the persistent 'undervaluation' critique of PSU disinvestment.

The Government and LIC are selling 60.72% of IDBI Bank, along with management control, to Fairfax-owned 10955230 Canada Inc. for ₹52,878 crore [1]. The deal revives the old charge that public assets are sold cheaply. The valuation design answers much of that charge, but not all of it.

Valuation approach adopted

• Two independent valuers used the Market Multiple Method (comparing IDBI with its PSB peers) and the Asset Valuation Method (fair net asset value). Both used accounts as on 31 March 2026 [1].
• Their average gave a benchmark of ₹75.99/share. The winning bid was higher than the benchmark and higher than each valuer's own estimate [1].

Merits: why it weakens the undervaluation critique

• Stock price set aside for good reason: GoI and LIC together held 94.72% [2], so only about 5% of shares were in public hands. Prices swinging between ₹61.01 and ₹118.38 [1] cannot fairly value a controlling stake.
• Two methods check each other: a peer comparison based on earnings, plus a floor based on assets, avoids depending on any single assumption.
• Competition set the price above the floor: 5 EoIs led to 2 qualified bidders, and the winning bid included a control premium [1].
• The state keeps a share of future gains: GoI keeps 15% and LIC keeps 19% [1], so both benefit if the bank's value rises after privatisation.
• Regulatory discount: RBI's Internal Working Group recommended a long-run 26% cap on promoter holdings [3]. Bidders therefore expect to sell down over time, which lowers what they will pay. This is a regulatory discount, not undervaluation.

Limitations: where the critique survives

• Thin contest: with only two final bids [1], beating the government's own benchmark does not prove this was the best price the market could offer.
• Opacity: the valuers' names are confidential [1], which makes later audit and parliamentary scrutiny harder.
• Future earnings not valued: neither method is a discounted cash-flow estimate [1], so the value of the new capital and technology the buyer brings is left out.
• Perception: a benchmark well below the ₹118.38 high [1] invites the charge of underpricing.

Verdict: The method is sound and reasonably defensible, but the process is only partly transparent.

Overall, the dual-method benchmark weakens the undervaluation charge, while thin competition and secrecy keep it alive. Three steps would close the gap: publish the valuation reports once the deal closes, have the CAG audit the valuation afterwards, and sell GoI's residual stake in stages through the Alternative Mechanism [1]. These steps would make disinvestment both efficient and accountable, in line with SDG 16's goal of transparent institutions.