New Delhi: The Union Cabinet on Wednesday cleared the purchase of 51% controlling stake in IDBI Bank Ltd by state-run insurer Life Insurance Corporation (LIC), said people aware of the development. As per the LIC-IDBI deal proposal, the debt-laden bank will issue preferential shares to Life Insurance Corporation (LIC) to raise capital. The LIC-IDBI deal has been approved, one of the persons quoted above said after the meeting of Union Cabinet, chaired by Prime Minister Narendra Modi.
LIC already has 7-7.5% stake in the bank and will acquire the remaining for majority holding.
“The LIC-IDBI Bank deal will trigger an open offer to protect the interest of minority shareholders in the bank,” sources had said earlier. As per Sebi takeover code rules, an acquirer has to give an open offer to the shareholders of target company on acquiring shares or voting rights of 25 per cent or more.
The board of Insurance Regulatory and Development Authority of India (Irdai), at its meeting held in Hyderabad in June, had permitted LIC to increase its stake from 10.82% to 51% in IDBI Bank.
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. IDBI Bank officers have opposed the proposed 51% acquisition by LIC, saying this is a clear move to privatise it, bypassing the assurance given to Parliament.
Although, the proposed acquisition by LIC would not bring any money to the government, the bank would get capital support between ₹ 10,000 crore and ₹ 13,000 crore, depending on the share price of the bank. With inputs from PTI
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