New Delhi: Shares of IDBI Bank Ltd jumped as much as 9.96% to an over two-week high of Rs 58.50 on BSE after a PTI report said that Life Insurance Corp. of India Ltd will make an open offer to minority shareholders of the bank. At 10.05am, IDBI Bank shares were trading 5.83% up at Rs 56.30 per share, while the benchmark Sensex rose 0.08% to 36,269.55 points. The IDBI Bank stock was on track to post gains for the 4th straight session. It has fallen nearly 11% this year as of last close.
LIC will approach the Securities and Exchange Board of India after getting approval from its board for acquiring a 51% stake in the state-owned bank, the report said. The Insurance Regulatory and Development Authority of India has already approved LIC’s proposal for the stake purchase, a move which will help the debt-ridden IDBI Bank get a capital support of Rs 10,000-Rs 13,000 crore.
LIC currently holds 8% in the state-run bank. Mint reported first on 11 June that the government may sell a majority stake in IDBI Bank to LIC to reduce its stake.
As per current regulations, an insurance company cannot own more than 15% in any listed financial firms. 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 LIC, it will get about 2,000 branches through which it can sell its products while the bank would get massive funds of LIC. The bank would also get accounts of about 22 crore policy holders and subsequent flow of fund.
With input from Reuters