The LIC board on Tuesday said it has taken a decision on the modalities of increasing stake in debt-ridden IDBI Bank to 51%.
The process is to be completed, so the board took necessary decisions, said Economic Affairs Secretary S.C. Garg, who is also a member of the LIC board.
The time table has been decided and an open offer is being explored, “either exemption or not, that is for SEBI to decide,” he said after the meeting.
Meanwhile, LIC is in the process of picking up additional 7% stake in IDBI Bank through preference shares. With this, its total holding in the bank would rise to 14.9%.
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% stake in debt-ridden IDBI Bank.
The bank, in which the government holds 85.96% stake, had posted a net loss of ₹2,409.89 crore in the quarter ended June 2018. It had posted a gross non-performing asset (NPA) of about ₹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% to 51% in IDBI Bank. As per current regulations, an insurance company cannot own more than 15% 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.