IDBI board may okay pref share allotment to LIC soon

State-run insurer gets board okay to buy 51% stake in debt-laden lender

New Delhi : IDBI Bank will soon convene the board meeting to approve allotment of preference shares to LIC, enabling the insurance behemoth to acquire 51 per cent stake in the bank.

The meeting could take place in a day or two, sources said. The board should approve the allotment latest by the end of this week, they added.

The board of the Life Insurance Corporation of India (LIC) 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.

“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 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.

After the approval, both the entities will seek regulatory clearances including from Securities and Exchange Board of India, and Reserve Bank of India.

Insurance Regulatory and Development Authority of India (Irdai) has already given approval to LIC for the stake purchase, a move which will help the debt-ridden state-owned bank get a capital support of Rs 10,000- 13,000 crore.

Irdai at its meeting held in Hyderabad last month, had permitted LIC to increase its stake from 7.98 per cent as of June 30, 2018, 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 firms.

Garg also indicated that 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 shareholding 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 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.

(For all the latest News, Mumbai, Entertainment, Cricket, Business and Featured News updates, visit Free Press Journal. Also, follow us on Twitter and Instagram and do like our Facebook page for continuous updates on the go)

Free Press Journal