Sebi to decide on LIC open offer for IDBI Bank: Garg
ACQUISITION PROCESS LIC board decides on modalities and timeline for increasing its stake in IDBI Bank to 51%
The Life Insurance Corp. of India (LIC) board on Tuesday took a decision on the modalities and timeline for increasing stake in IDBI Bank to 51%, a move that will provide the insurance behemoth entry into the banking space.
The process is to be completed, so the board has taken necessary decisions, said economic affairs secretary SC Garg, who is also a member of the LIC board.
“The board once again approved to acquire up to 51%. This has been done earlier and has been reiterated today,” he said after the meeting.
The time table has been decided and an open offer is being explored; “either exemption or not, that is for Securities and Exchange Board of India (Sebi) to decide,” he said without disclosing the timeline.
According to people familiar with the matter, the board has decided on appointment of a merchant banker and a legal advisor to carry out the acquisition process.
The board asked the insurer to do due diligence of the bank and then proceed for various regulatory clearances.
Meanwhile, LIC is in the process of picking up additional 7 per cent stake in debt-ridden IDBI Bank through preference shares. With this, its total holding in the bank would rise to 14.9
NEW DELHI:
per cent. At present, LIC holds 7.98 % stake in the public sector bank.
The stake hike will help the lender meet the immediate capital requirement that will enable IDBI Bank to meet the regulatory norms at the end of second quarter. In August, the Union Cabinet had approved LIC’s proposed acquisition of up to 51 per cent stake in debt-ridden IDBI Bank.
The bank, in which the government holds 85.96 per cent stake, had posted a net loss of Rs 2,409.89 crore in the quarter ended June 2018. It had posted a gross non-performing asset (NPA) of about Rs 57,807 crore.
The Insurance Regulatory and Development Authority of India board, at its meeting held in Hyderabad in June, had permitted LIC to increase its stake from 10.82 per cent to 51 per cent in IDBI Bank.
As per current regulations, an insurance company cannot own more than 15 per cent 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 through which it can sell its products, while the bank would get massive funds of LIC.