LIC board approves acquiring majority stake in IDBI Bank

New Delhi, July 16: The board of Life Insurance of India (LIC) on Monday gave the approval for acquiring up to 51% stake in IDBI Bank.

The life insurer has around 7.5% stake in LIC at present and will acquire the remaining stake from the government, Subhash Chandra Garg, Secretary, Department of Economic Affairs said, adding that in most probability IDBI Bank will issue preference shares to LIC to complete the deal.

Using this route rather than LIC directly buying the government's stake in IDBI Bank will ensure that the bank receives the capital, Garg added.

He added that an open offer may not be required as the public shareholding in IDBI Bank is very small at 5%. "LIC will go through the process and make the open offer if necessary, but it is not very material." He said the pricing of the deal will depend on the formula of the preference share issuance.

When asked if the deal will require the government's nod, Garg said the deal will require the nod of the government.

The government has a 85.96% stake in IDBI Bank.

LIC's stake buy will help the debt-ridden state-owned bank get a capital support of Rs 10,000- 13,000 crore.

Now the state-owned LIC will approach markets regulator SEBI.

Insurance regulator IRDAI has already given its approval to the insurer for the stake purchase.

LIC's stake buy will help the debt-ridden state-owned bank get a capital support of Rs 10,000- 13,000 crore.

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.

It will get about 2,000 branches through which it can sell its products, while the bank would get massive funds of LIC. The bank would also get accounts of about 22 crore policy holders and subsequent flow of fund.

Once the deal goes through, IDBI Bank, which is grappling with mounting loans and gross non-performing assets rising to a staggering ₹55,600 crore at the end of the March quarter, will get much needed capital support to revive its fortune.