LIC likely to take management control of debt-laden IDBI Bank

Life Insurance Corporation of India (LIC) is expected to get management control of IDBI bank once it acquires 51 per cent equity stake in the ailing public sector lender.

LIC has sought promoter status for injecting over 13,000 crore to take 51 per cent controlling stake In IDBI Bank, which means that the state-run insurer may also get management control, including role in top management and appointments to the board of the state-run bank, but with government permission.
It is still not clear whether LIC will be able to take management control of IDBI bank and influence its business strategy and decisions as current regulations do not allow insurance companies to run banks.
While it is not clear what specific management rights LIC will get, they may include inducting nominees on board and influence in shaping business strategies, senior IDBI Bank executives said.
The board of IDBI Bank has accepted LIC’s proposal and decided to seek government of India's decision in this regard.
B Sriram, managing director and chief executive of IDBI Bank said by seeking promoter status, LIC obviously is seeking managerial control as well.
While the bank's board at its meeting considered letter from LIC expressing interest in acquiring 51 per cent controlling stake, Sriram said all further action would only happen after banks gets the response of the Government of India.
The government owns 85.96 per cent of IDBI Bank, while LIC holds 7.98 per cent at end of June 2018, according to filings with BSE.
IDBI Bank will need to amend its article of association before seeking approval from the union cabinet to reduce government’s stake below 51 per cent. This, according to government sources, may take about a month.
IDBI will further seek nod from its shareholders, RBI and Sebi. The bank will have to issue a postal ballot notice and hold a separate general meeting of its stakeholders.
IDBI Bank has already sought shareholders nod to raise capital up to Rs5,000 crore by issuing fresh shares, including through Qualified Institutional Placement (QIP).