LIC to make open offer to IDBI Bank shareholders: report

Life Insurance Corporation of India (LIC) will make an open offer to minority shareholders of IDBI Bank in which it proposes to acquire up to 51 per cent equity, reports quoting sources close to the development said.

The state-owned life insurer will approach market regulator Sebi after getting approval from its board for acquiring stake in the state-owned bank Insurance regulator. Irdai has already given its approval to LIC for the stake purchase, a move which will help the debt-ridden bank get a capital support of Rs10,000-13,000 crore.
The LIC-IDBI Bank deal will trigger an open offer to protect the interest of minority shareholders in the bank, sources said. As per Sebi takeover norms, an acquirer has to make an open offer to the shareholders of the target company on acquiring shares or voting rights of 25 per cent or more.
According to sources, the board of Insurance Regulatory and Development Authority of India (Irdai), at its meeting held in Hyderabad last month, had permitted Life Insurance Corporation (LIC) to increase its stake from 10.82 per cent to 51 per cent in IDBI Bank.
Irdai’s assent was also deemed surprising as under current regulations, an insurance company cannot own more than 15 per cent 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.
The move will reportedly give the debt-laden bank a relief of about Rs10,000-13,000 crore, while LIC will get about 2,000 branches through which it can sell its products.
The bank would also get accounts of about 220 million policy holders and subsequent flow of fund.
If the deal goes through, debt-laden IDBI Bank which had gross non-performing assets of a staggering Rs55,600 crore at the end of latest March quarter, will get much needed capital support to revive its fortune.
IDBI Bank had reported a net loss of Rs 5,663 crore during the period.
LIC is expected to infuse funds into IDBI Bank through issuance of fresh equity so that the government’s stake, which is currently at 80.96 per cent would come down below 50 per cent as announced in the budget.