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LIC Board to meet on 4 September to decide modalities for raising stake to 51% in IDBI Bank
The LIC board will discuss time line for open offer, board level appointments and future strategy for revitalising IDBI Bank, people aware of the matter said
New Delhi: The LIC board will meet on 4 September to decide on the modalities for increasing stake in debt-ridden IDBI Bank to 51%, a move that will provide insurance behemoth entry into the banking space.
The board will discuss time line for open offer, board level appointments and future strategy for revitalising IDBI Bank, sources said.
LIC is slated to pick up additional 7% stake in IDBI Bank soon. With this, total holding in the bank would rise to 14.9%. At present, LIC holds 7.98% stake in the public sector bank.
The bank received a letter dated 28 August, 2018 from LIC giving in-principle approval for subscription of equity shares on preferential basis subject to their total exposure not exceeding 14.9% of post issue capital of IDBI Bank at any point of time, the bank had said in a regulatory filing on Tuesday.
The board will consider the proposal on 31 August, it added. The first round of stake sale will help the debt-ridden lender to meet immediate capital requirement, sources said.
In August, the Union Cabinet had approved LIC’s proposed acquisition of up to 51% stake in debt-ridden IDBI Bank.
The board at its meeting, to be held on 31 August, will consider the proposal for seeking shareholders’ approval through postal ballot for preferential issue of capital to LIC, aggregating up to 14.90% of the bank’s post issue paid up capital, it added.
The bank, in which the government holds 85.96 per cent stake, had posted a net loss of ₹ 2,409.89 in the quarter ending June 2018. It had a gross non-performing asset (NPA) of about ₹ 57,807 crore.
The board of Insurance Regulatory and Development Authority of India (Irdai), at its meeting held in Hyderabad in June, had permitted LIC to increase its stake from 10.82% to 51% in IDBI Bank.
As per current regulations, an insurance company cannot own more than 15% in any listed financial firm.
LIC has been looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal is expected to provide business synergies despite the lender’s stressed balance sheet.
With the culmination of the deal, LIC will get about 2,000 branches by which it can sell its products, while the bank would get massive funds of LIC.
The bank would also get accounts of about 22 crore policy holders and subsequent flow of fund.
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Business NewsIndustryBankingLIC Board to meet on 4 September to decide modalities for raising stake to 51% in IDBI Bank
First Published:29 Aug 2018, 11:32 PM IST
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