LIC board approves IDBI Bank buyout; lender shares end down by 1.5%

Shares of IDBI Bank jumped as much as 3.14 per cent to Rs 59.10 after the LIC board approved acquisition of up to 51 per cent stake in IDBI Bank.

After opening the session flat at Rs 57.30, the lender shares touched intraday high of Rs 59.10 and a low of Rs 53.30. The lender shares ended down by 1.48 per cent at Rs 56.45.

The state-owned Life Insurance Corporation will now approach the Securities and Exchange Board of India and the Reserve Bank of India for their approval.

LIC has already received approval from the Insurance Regulatory and Development Authority of India for the stake purchase, a move which will help the debt-ridden state-owned bank get a capital support of Rs 10,000-13,000 crore.

“The LIC-IDBI Bank deal will trigger an open offer to protect the interest of minority shareholders in the bank,” said a source.

As per SEBI takeover code, an acquirer has to give an open offer to the shareholders of the target company on acquiring shares or voting rights of 25 per cent or more.

IRDAI at its meeting held in Hyderabad last month, had permitted LIC to increase its stake from 10.82 per cent to 51 per cent in IDBI Bank. As per current regulations, an insurance company cannot own more than 15 per cent 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.

IDBI Bank is grappling with mounting toxic loans with gross non-performing assets rising to Rs 55,600 crore at the end of March quarter. During this period, the lender’s net loss stood at Rs 5,663 crore.

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