LIC board takes decision on modalities and timeline for increasing stake in IDBI

The LIC board Tuesday took a decision on the modalities and timeline for increasing stake in IDBI Bank to 51 percent, 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 S C Garg, who is also a member of the LIC board.

"The board once again approved to acquire up to 51 percent. This has been done earlier and has been reiterated today," he said after the meeting.

The timetable has been decided and an open offer is being explored; "either exemption or not, that is for Sebi to decide," he said without disclosing the timeline.

According to sources, the board has decided on the appointment of a merchant banker and a legal advisor to carry out the acquisition process.

The board asked the insurer to do the due diligence of the bank and then proceed for various regulatory clearances.

Meanwhile, LIC is in the process of picking up an additional 7 percent stake in debt-ridden IDBI Bank through preference shares. With this, it's total holding in the bank would rise to 14.9 percent. At present, LIC holds 7.98 percent 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 the second quarter. In August, the Union Cabinet had approved LIC's proposed acquisition of up to 51 percent stake in debt-ridden IDBI Bank.

The bank, in which the government holds 85.96 percent 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 percent to 51 percent in IDBI Bank. As per current regulations, an insurance company cannot own more than 15 percent 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.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)