The board of state-run Life Insurance Corporation (LIC) on Monday approved the acquisition of up to 51 percent stake in the government-owned IDBI Bank. Briefing reporters after the board meeting in New Delhi that lasted about two hours, Garg said the sale process is likely to take place through preferential shares.
The amount we’re looking at (from stake sale) will be as per the issue of the preferential shares. Queried on whether an open offer would also be made for the IDBI stock, Garg said this was unlikely. LIC will now approach the markets regulator Securities and Exchange Board of India (Sebi) for approval, as well as for clearance from the Reserve Bank of India and the government.
The IRDAI has already given its approval for the stake purchase stipulating that the interests of LIC policyholders are to be protected and reduction of LIC’s stake in IDBI Bank over a period of time. According to the source, the LIC Board discussed the pros and cons of the stake acquisition proposal and found that it would be beneficial for one of Asia’s largest insurer as well as for IDBI Bank.
IDBI Bank, whose gross non-performing assets (NPAs), or bad loans, amounted to a staggering Rs 55,600 crore at the end of the fourth quarter ended March, posted a loss of Rs 5,662.76 crore for the quarter, its numbers being pulled down further by its deteriorating NPAs. The bank had reported a net loss of Rs 3,199.77 crore in the corresponding quarter of the 2017-18 fiscal. It has now reported losses for the sixth successive quarter. However, the employees’ unions in both the IDBI Bank and LIC are opposed to the deal.