State-owned IDBI Bank said on Friday its board will meet next week to consider preferential allotment of up to 51 percent shares to insurance behemoth LIC to acquire the debt-ridden bank.
In a regulatory filing, IDBI Bank said it has received a letter from LIC conveying approval of their Board of Directors for subscribing to the equity capital of the bank, through preferential issue /open offer, up to 51 percent, as an acquisition of controlling stake as promoter in the bank.
IDBI Bank further said its board will meet on 4 October to “consider the preferential allotment of equity shares to LIC aggregating up to 51 percent…”
Representational image. Reuters.
Earlier this month, the LIC board had taken decision on the modalities and timeline for increasing stake in IDBI Bank to 51 percent.
The bank, in which the government holds 85.96 percent stake, had posted a net loss of Rs 2,409.89 crore in the quarter ended June 2018. It had posted a gross non-performing asset (NPA) of about Rs 57,807 crore.
The Insurance Regulatory and Development Authority of India in June had permitted LIC to increase its stake from 10.82 percent to 51 percent in the IDBI Bank. As per current regulations, an insurance company cannot own more than 15 percent 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.
With the culmination of the deal, LIC will get about 2,000 branches through which it can sell its products, while the bank would get massive funds of LIC.
IDBI Bank’s scrip closed at Rs 50 on BSE, up 0.40 percent.