IDBI Bank on Tuesday said its board has decided to seek the government’s decision on Life Insurance Corporation of India’s (LIC) proposal to acquire 51% stake in the bank.
The public sector lender said in a regulatory filing that the bank has received a letter dated July 16, 2018 from LIC expressing its interest in acquiring 51% controlling stake in IDBI Bank, as a promoter through preferential allotment of shares or open offer. “Bank’s board in its meeting held today, i.e. July 17, 2018 has considered the above letter and decided to seek government of India’s decision in this regard,” the statement said.
B Sriram, MD and CEO, IDBI Bank told reporters that depending on the communication from the government and based on the approval, the bank will again take up the proposal with its board. “In addition to that, we are also advising the Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) separately to keep them informed. Any further action on this will be only after we get to know the decision of the government of India on the proposal of LIC,” Sriram said.
He added that once the government’s approval comes to the bank, the bank’s board will again take it up on record and subsequently, other regulatory approvals, including shareholders’ nod will be required, depending on the mode of
According to Sriram, the capital infusion will help IDBI Bank in a significant way. “I think the intent is very clear today. They have requested for promoter status and controlling stake of 51%, obviously the intent is to take management control as well,” he explained.
Meanwhile, the LIC’s board has already approved the plan for the insurer to raise its stake in IDBI Bank to 51% from the current 7.98%. The deal will likely involve issuance of preferential shares to LIC by the stressed bank, rather than an outright sale of the government’s stake in the bank to LIC. IDBI Bank, which had received capital support of Rs 10,610 crore from the government last fiscal, the most by any public sector bank, may get to lay its hands on another around Rs 13,000 crore, thanks to the LIC deal.