Irdai to set timeline for LIC to pare stake in IDBI Bank

The insurance regulator will set a timeline for Life Insurance Corporation of India (LIC) to eventually reduce its stake in IDBI Bank from 51 per cent to 15 per cent, said Subhash Khuntia, chairman, Insurance Regulatory and Development Authority of India (Irdai).

However, he did not specify when the regulator will announce the timeline but it will be done after the proposed acquisition of the bank has been completed. LIC currently has a 7.98 per cent stake in IDBI Bank with the government holding 85.96 per cent. The life insurer wishes to increase its stake holding in the bank given its network and institutional strength. This will cost the public sector giant around ~100-130 billion. The company will get promoter status and management control after acquisition.

The board of IDBI Bank met last week and approved a proposal that sought shareholder nod for preferential issue of equity capital aggregating to 14.90 per cent of the lender’s post issue paid-up capital. And on Tuesday, the board of directors of LIC met and finalised the contours of the proposed acquisition. Subhash Chandra Garg, secretary of the department of economic affairs, recently said that LIC’s board finalised the time-table for the completion of the deal. Moreover, he said that the board is mulling whether to make an open offer to the bank’s minority investors or seek an exemption from the Securities and Exchange Board of India (Sebi). Garg, who is on LIC’s board, said that the markets regulator

will ultimately decide whether there will be any exemption to the existing regulations.

In June, the insurance regulator had allowed LIC to go ahead with the stake buy in, and had relaxed regulatory rules which sets a cap of a maximum of 15 per cent equity shareholding for an insurance company to invest in another company.

In August, the cabinet approved LIC's proposed acquisition of up to 51 per cent stake in the bank.