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

Global rating agency Moodys 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 investors funding plans and strong liquidity positionAs of June 30 2026 Fairfaxs financial leverage stood at around 34 per cent which declined to 27 per cent after excluding nonrecourse debt at its noninsurance companies Moodys said in a statementThe rating agency noted that it does not expect a significant increase in Fairfaxs financial leverage given its funding plans for the transactionMoodys also highlighted Fairfaxs 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 transactionAs of June 30 2026 Fairfax had USD 23 billion in cash and liquid investments at the holding company providing it with a liquidity cushion as it pursues the transactionLast week the government approved Torontobased Fairfax Financial Holdings Ltd primarily an insurance and reinsurance holding company as the strategic buyer in the auction to acquire 6072 per cent of IDBI Bank for Rs 52878 crore about USD 56 billionThe parties expect to close the transaction within the next six to nine months pending regulatory approval and other customary closing conditions it saidThe IDBI acquisition is the largest to date by a foreign investor in the Indian financial services sector and one of Fairfaxs largest equity holdings on its balance sheet posttransactionThe proposed acquisition will enhance Fairfaxs position in the highgrowth India market and is expected to be a growing source of diversified earnings for the group a credit positive it saidFairfax 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 Fairfaxs interests in Go Digit Life Insurance Go Digit General Insurance and IIFL Capital it addedBy 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 highgrowth market the agency saidIDBI Indias sixthlargest private sector bank by deposits witnessed a management reorganisation in 2018 amid financial distress and was recapitalised by the government and Life Insurance CorporationThe changes helped restore the banks 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 Indias financial services sectorThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever