LIC board approves acquisition of IDBI

New Delhi, July 16: The LIC board on Monday gave approval to the insurance behemoth to acquire IDBI Bank by raising stake to 51 per cent via preferential shares, economic affairs secretary S. C. Garg said on Monday.

The debt laden bank will issue preferential shares to state- owned LIC to raise capital. “Most likely that ( preferential share allotment route) would be the way. The bank needs capital. They will issue preferential shares that should be the method,” said Mr Garg, who is on the LIC board.

“The other one is that they can buy from the government but that does not provide capital to the IDBI Bank and therefore, that is the preferable mode to do it ( acquire the bank),” he said after the meeting held here.

The next step for the LIC is to approach Sebi, as the bank, which is also state- owned, is a listed entity. Irdai has already given its nod to the insurer for the stake purchase.

IDBI Bank too has to get approval of its board to sell stakes to LIC.

Mr Garg also indicated the there may not be an open offer as per the Sebi regulations, as public holding in the bank is very limited. “Open offer may or may not come about. The public share holding is very small. It is only about 5 per cent. And the pricing formula et cetera may not be attractive. But they will go through that process and if necessary they will make that open offer, but it is not a very material issue in this context,” he said.

LIC already has 7- 7.5 per cent stake in the bank and will acquire the remaining for majority holding, Mr Garg said without giving much details.