State-owned IDBI Bank said Wednesday it has received approval from market regulator SEBI for issuance of preference shares to Life Insurance Corporation (LIC).
State-owned IDBI Bank said Wednesday it has received approval from market regulator SEBI for issuance of preference shares to Life Insurance Corporation (LIC). The shareholding of LIC in IDBI Bank will increase to up to 51 per cent after the preference share issue.
“This is to inform that on an application being made by IDBI Bank, SEBI, vide its approval letter dated October 3, 2018, has acceded to our request to use method of issuance of equity shares to Life Insurance Corporation of India (LIC) directly on Preferential Basis … to comply with Minimum Public Shareholding (MPS) requirements,” IDBI Bank said in a filing to stock exchanges.
“The letter also states that the above approval shall not be treated as precedent and that the approval is subject to the bank obtaining due approvals of its shareholders, Reserve Bank of India and Government of India,” it said.
IDBI Bank board will meet on Thursday to consider preferential allotment of up to 51 per cent shares to LIC. Last month, the LIC board had taken decision on the modalities and timeline for increasing stake in IDBI Bank to 51 per cent.
The bank, in which the government holds 85.96 per cent 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 per cent to 51 per cent in the 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.
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.