Moody's does not expect significant increase in Fairfax's financial leverage from IDBI takeover

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Global rating agency Moody's on Monday said it expects Fairfax Financial Holdings' proposed acquisition of a majority stake in IDBI Bank to have limited impact on its financial leverage, citing the Canadian investor's funding plans and strong liquidity position.

As of June 30, 2026, Fairfax's financial leverage stood at around 34 per cent, which declined to 27 per cent after excluding non-recourse debt at its non-insurance companies, Moody's said in a statement.

The rating agency noted that it does not expect a significant increase in Fairfax's financial leverage, given its funding plans for the transaction.

Moody's also highlighted Fairfax's policy of maintaining at least USD 1 billion in cash and liquid investments at the holding company at all times, a practice it expects the company to continue after the transaction.

As of June 30, 2026, Fairfax had USD 2.3 billion in cash and liquid investments at the holding company, providing it with a liquidity cushion as it pursues the transaction.

Last week, the government approved Toronto-based Fairfax Financial Holdings Ltd, primarily an insurance and reinsurance holding company, as the strategic buyer in the auction to acquire 60.72 per cent of IDBI Bank for Rs 52,878 crore (about USD 5.6 billion).

The parties expect to close the transaction within the next six to nine months, pending regulatory approval and other customary closing conditions, it said.

The IDBI acquisition is the largest to date by a foreign investor in the Indian financial services sector and one of Fairfax's largest equity holdings on its balance sheet post-transaction.

The proposed acquisition will enhance Fairfax's position in the high-growth India market and is expected to be a growing source of diversified earnings for the group, a credit positive, it said.

Fairfax will fund the transaction through a combination of holding company cash, dividends from its operating insurance companies, potential asset sales, as well as contribution of all of Fairfax's interests in Go Digit Life Insurance, Go Digit General Insurance and IIFL Capital, it added.

By contributing Digit and IIFL Capital to IDBI Bank, Fairfax will be the majority owner of a diversified financial services operation in India, providing a broad range of banking, insurance and wealth management services in a high-growth market, the agency said.

IDBI, India's sixth-largest private sector bank by deposits, witnessed a management reorganisation in 2018 amid financial distress and was recapitalised by the government and Life Insurance Corporation.

The changes helped restore the bank's financial position and operating performance, contributing to sustained profitability since 2021, it said, adding that the proposed transaction comes amid rising foreign investor interest in India's financial services sector.

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