TransUnion-CIBIL share deal vs Fairfax-IDBI Bank share deal

Some commentators have been drawing loose parallels between the proposed Fairfax acquisition of IDBI Bank and the transfer of control of CIBIL to TransUnion between 2014 and 2017. This note is meant to set the record straight on why the two are not comparable.

The IDBI Bank deal

Fairfax Financial Holdings has reportedly been selected to acquire a 60.72% controlling stake in IDBI Bank at ₹81 per share. The stake comes from the Government (30.48%) and LIC (30.24%), for a total of about ₹53,000 crore. The deal is not yet final. Valuation discussions with the Government were still under way in September. The deal will also need RBI’s fit-and-proper clearance and CCI approval, and Fairfax must make an open offer to public shareholders.

IDBI Bank is a listed company with a market price, and the transaction is a negotiated sale of shares. Above all, the buyer takes on the responsibility of running a bank. If it fails to run the bank well, it risks its ₹53,000 crore. This is not a sale of data. It is a transfer of responsibility for running a regulated business.

Why CIBIL was different

CIBIL was an information company, and almost all of its value lay in its data. That data was the credit history of hundreds of millions of Indians, contributed by every bank and lender in the country. Unlike IDBI Bank, CIBIL was unlisted, so there was no market price to check the deal against. Buying control of CIBIL was, in substance, buying control of India’s most important credit-information database and the commercial benefits that come with it.

Both deals involve personal data. The difference is that IDBI Bank holds its own customers’ data as one bank among many. CIBIL holds pooled credit information from the entire lending system, under the special regime of the Credit Information Companies (Regulation) Act, 2005.

How TransUnion acquired control of CIBIL

November 2000 – Formation. On 10 November 2000, the Government permitted SBI to take equity in a new credit bureau in collaboration with HDFC, Dun & Bradstreet and TransUnion International. SBI and HDFC held 40% each, and D&B and TransUnion 10% each. RBI later directed SBI and HDFC to spread their holdings across other banks and institutions, so that no shareholder held more than 10%. TransUnion has been CIBIL’s technology and analytics partner since 2001.

Up to early 2014 – TransUnion at 27.5%. Before the 2014 sales, TransUnion held 27.5%. SBI and ICICI Bank held 10% each. Bank of Baroda, Bank of India, PNB, Union Bank, Citicorp Finance, HSBC, Standard Chartered, IOB, HDFC and Central Bank of India held 5% each, and Sundaram Finance held 2.5%.

March to May 2014 – Crossing into control. Shortly before these sales, the Government raised the FDI cap for credit information companies from 49% to 74%. In March 2014, PNB and Central Bank of India sold their entire stakes to TransUnion, and by the end of that quarter TransUnion held 47.5%. On 20 and 21 May 2014, two further transactions took it to 55%. In all, six sellers were involved: Citicorp Finance, PNB, Central Bank of India, HDFC, Standard Chartered and Sundaram Finance. TransUnion paid about US$ 50.6 million in cash for this 27.5%, which gave it control of the company. At the then exchange rate, that implies a value of roughly ₹1,100 crore for the whole of CIBIL. TransUnion dates its control of CIBIL from 21 May 2014.

2014–2015 – Domestic investors at low valuations. Aditya Birla PE bought 4%. A year later, SBI sold 4% to India Alternatives and IIFL at a price that valued CIBIL at about ₹1,550 crore.

2016 – 100% FDI permitted. RBI permitted up to 100% FDI in credit information companies, subject to conditions. TransUnion then bought ICICI Bank’s 6% and Bank of Baroda’s 5%, taking its holding from 66.1% to 77.1%.

2017 – 92.1% and rebranding. TransUnion raised its stake to 92.1%, and the company became TransUnion CIBIL. That year Bank of India sold its 5% for ₹190.6 crore, which valued the whole company at about ₹3,800 crore.

What was the data worth?

Credit records cannot lawfully be sold one by one. CICRA limits who may receive credit information, and the DPDPA adds consent and purpose restrictions. Any per-record figure is therefore a way of sizing the asset, not a market price.

TransUnion CIBIL today holds credit files on about 600 million individuals and 32 million businesses, and serves over 7,000 institutions.

Lawful commercial value. Industry estimates suggest that lenders pay ₹300–1,500 for a pre-qualified lead with a good credit score. Such a customer may be worth ₹20,000–50,000 over their lifetime in interest margin and fees. These are indicative figures.
Black-market floor. Even stolen data has a price. A 2022 NordVPN study found the identities of Indians selling on bot markets at an average of about ₹490 each.

On these benchmarks, the database would be worth something like ₹18,000 crore (at ₹300 per record) to ₹29,000 crore (at ₹490 per record). Control of it changed hands at implied valuations of roughly ₹1,100 crore in 2014, ₹1,550 crore in 2015 and ₹3,800 crore in 2017. The database was smaller then than it is today, but the gap is still large enough to ask whether the shares were sold well below their fair value. Unlike in the IDBI case, there was no market price against which anyone could check.

The timing

The regulatory change that allowed TransUnion to cross 49%, and the share purchases that followed, all happened while Shri P. Chidambaram was Finance Minister (August 2012 – May 2014) and Dr. Raghuram Rajan was RBI Governor. The election results were declared on 16 May 2014. TransUnion completed its majority acquisition on 20–21 May, and the new Government was sworn in on 26 May. Control of India’s largest credit bureau thus passed to a foreign company in the final days of the outgoing Government.

The undersigned had raised objections to this deal at the time and called for an investigation, but none has been ordered. Now some are accusing the present Finance Minister of corruption in the Fairfax deal.

Conclusion

In our considered view, the two deals are different in kind. The CIBIL transaction transferred control of a national credit-data asset in an unlisted company, without public price discovery. The IDBI transaction is a negotiated sale of shares in a listed bank, in which the buyer must run the business and answer to the regulator. If any deal deserves a closer look, it is the first.

Naavi

Also read: Is TransUnion-CIBIL guilty of Accessing Critical Personal Data through surreptitious means?

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