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LIC to make open offer to IDBI Bank shareholders

Published: Jul 11, 2018

By TIOLCORPLAWS News Service

NEW DELHI , JULY 11, 2018: The state-owned life insurer, LIC would make an open offer to minority shareholders of IDBI Bank in which it proposes to acquire up to 51% equity. In the process, the LIC would approach market regulator SEBI after getting approval from its board for acquiring stake in the state-owned bank.

Insurance Regulatory and Development Authority of India (IRDAI) had already given its approval to LIC for the stake purchase, a move which would help the debt-ridden bank get a capital support of Rs 10,000-Rs 13,000 cr.

As per SEBI takeover code rules, an acquirer had to give an open offer to the shareholders of target company on acquiring shares or voting rights of 25 % or more. The IRDAI, at its meeting held in Hyderabad last month, had permitted the LIC to increase its stake from 10.82 % to 51 % in IDBI Bank.

LIC was looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal was expected to provide business synergies despite the lender's stressed balance sheet. For LIC it would get about 2,000 branches through which it could sell its products while the bank would get massive funds of LIC. The bank would also get accounts of about 22 cr policy holders and subsequent flow of fund.

If the deal goes through IDBI Bank , which was grappling with mounting toxic loans with gross non-performing assets rising to a staggering Rs 55,600 cr at the end of latest March quarter, would get much needed capital support to revive its fortune. During the period, the lender's net loss stood at Rs 5,663 cr. The govt would not get the proceeds from the stake reduction as the money would be utilised for the bank's revival. It could happen through issuance of fresh equity so that the government's stake which is presently at 80.96% would come down below 50% as announced in the budget.

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