Insurance behemoth LIC on Monday came a step closer to making its banking foray, with its Board giving the nod for a buyout of the state-owned IDBI Bank Ltd.
The LIC board approved the acquisition of up to 51 per cent stake in IDBI Bank, Economic Affairs Secretary Subhash Chandra Garg told reporters.
LIC already holds a 7.98 per cent stake in IDBI Bank as of end June this year; the latest approval will enable it acquire another 43 per cent stake in the bank.
As IDBI Bank requires capital support, the preferred option for LIC to acquire the additional 43 per cent will be through preferential issue of shares, said Garg.
No open offer
Garg said that an open offer may not be required as public holding in the bank is low.
At the same time, Garg, who is a board-member of LIC, said the insurance behemoth was open to coming out with an open offer if required.
He felt that an open offer may not be material in the current context.
Armed with its board approval, LIC is now expected to approach the capital market regulator SEBI to bless this proposed buyout.
It may be recalled that insurance regulator IRDAI had on June 29 given its nod for LIC to acquire a controlling interest of 51 per cent in IDBI Bank. Indications are that LIC’s buyout of IDBI Bank would lead to capital infusion of ₹10,000-13,000 crore in the beleaguered bank, which closed the year ended March with gross NPA of about ₹55,000 crore.
‘Strategic’ move
For LIC, the move to acquire a controlling interest in IDBI Bank is “strategic” as it would provide business synergies.
At one swoop, LIC will get access of over 2,000 branches of IDBI Bank through which the insurer can sell more of its products.
For IDBI Bank, besides capital support, the deal is expected to help the lender secure access to nearly 22 crore policyholders.