Fairfax India new issue

[Haryana]

Cautious reporting on IDBI takeover by Fairfax owned IIFL. 

https://www.indiainfoline.com/news/companies/fairfax-emerges-frontrunner-for-idbi-bank-stake-sale-proposed-5-5-billion-deal-could-be-a-landmark-privatisation

[Txvestor]

20 hours ago, SafetyinNumbers said:

How do you gauge this? 

Just look at the process, it's been dragged out, withdrawn, and restarted, and there are only 2 bidders remaining and the prices being reported are below where it was trading a few months ago. None of that speaks to strong demand. 

[SafetyinNumbers]

1 hour ago, Txvestor said:

Just look at the process, it's been dragged out, withdrawn, and restarted, and there are only 2 bidders remaining and the prices being reported are below where it was trading a few months ago. None of that speaks to strong demand. 

I see it differently. The process was always going to take a long time (4 years so far in this case). They negotiate terms before price. It’s a big investment in time to find out the price wasn’t close to expectations. I think it also depends on government goals. Selling to a large established Indian bank probably means job cuts. Selling to Fairfax means a chance to create a global champion. I also don’t think taking an efficient market lens is correct here. The float was only 5% so was squeezed higher on speculation. The price was always going to be lower. It has to be low enough so the public doesn’t tender.

[Txvestor]

4 minutes ago, SafetyinNumbers said:

I see it differently. The process was always going to take a long time (4 years so far in this case). They negotiate terms before price. It’s a big investment in time to find out the price wasn’t close to expectations. I think it also depends on government goals. Selling to a large established Indian bank probably means job cuts. Selling to Fairfax means a chance to create a global champion. I also don’t think taking an efficient market lens is correct here. The float was only 5% so was squeezed higher on speculation. The price was always going to be lower. It has to be low enough so the public doesn’t tender.

So why was an external bank like a large North American bank, Japanese bank etc involved or even apparently interested. $5B is Chump change for JPM or Mitsubishi and well worth it to get a strong foothold in an emerging economy like India. I understand the gov't may have different priorities but to say this was a super competitive and efficient bid process would be a stretch. 

[SafetyinNumbers]

7 minutes ago, Txvestor said:

So why was an external bank like a large North American bank, Japanese bank etc involved or even apparently interested. $5B is Chump change for JPM or Mitsubishi and well worth it to get a strong foothold in an emerging economy like India. I understand the gov't may have different priorities but to say this was a super competitive and efficient bid process would be a stretch. 

It might be chump change but it’s a big distraction and riskier for JPM or Mitsubishi when they don’t understand the culture. You might be right but that’s what makes a market.