To determine whether IDBI Bank stock is undervalued, the most important thing is to know whether it’s a private sector or public sector bank.
As readers are well aware, public sector banks in India tend to command lower price-to-earnings (PE) and price-to-book (PB) multiples than their private sector peers.
Though IDBI Bank is effectively government-controlled, it’s classified as a private sector bank for regulatory purposes because Life Insurance Corporation of India (LIC) became its controlling shareholder in 2019.
As of 2026:
- The government of India holds about 45.48%
- LIC holds about 49.24%
- Public shareholders hold about 5.3% because LIC, not the government, is the largest shareholder. IDBI Bank is categorized as a private sector bank by the Reserve Bank of India.
IDBI Bank's valuations compared
If IDBI Bank is considered a private sector bank, its numbers make for an interesting comparison.
The stock trades at PE and PB multiples that are lower than those of most large private sector banks. In fact, its PE multiple is somewhere between those of private sector and public sector banks.
IDBI Bank stock trades at much higher multiples than some public sector banks such as Canara Bank, PNB and Bank of Baroda, but similar to those of Indian Bank.
This is what makes the bank’s valuations interesting. While it’s a private sector bank on paper, it trades closer to public sector valuations. Moving ahead, its valuations could expand if the government sells its stake in the bank.
Re-rating catalyst
The government (45.48%) and Life Insurance Corporation of India (49.24%) are jointly looking to sell a 60.7% stake in the bank and transfer management control. Bids were reportedly received in February from entities such as Fairfax Financial, Emirates NBD, and Kotak Mahindra Bank. In March, reports emerged that the government had rejected these bids as they were below its expected valuation, causing the stock to fall sharply. However, it revived the sale process in April and began reassessing valuation and transaction terms.
Recently, media reports said the divestment remains on track and could be completed during FY27, although the final timeline depends on valuations, negotiations, and regulatory approvals.
Should the divestment take place in FY27, there is a chance that the bank could be awarded higher multiples, closer to those of private sector banks.
Should you consider investing?
IDBI Bank is not a classic long-term banking investment based on franchise strength alone. It’s more of a special-situation stock linked to privatization.
If you believe the government will complete the sale and are comfortable with event-related risk, it may be worth adding the stock to your watchlist. But if you want a bank driven primarily by business growth rather than a divestment catalyst, you need to look at fundamentals more closely.
Investors should always evaluate a company's fundamentals, corporate governance, and stock valuations before making an investment decision.
Happy investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.