New Delhi: State-owned IDBI Bank said on Wednesday it has received approval from market regulator Securities and Exchange Board of India (SEBI) for issuance of preference shares to Life Insurance Corporation (LIC).
The shareholding of LIC in IDBI Bank will increase to up to 51 percent after the preference share issue.
"This is to inform that on an application being made by IDBI Bank, SEBI, vide its approval letter dated 3 October 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 percent shares to LIC.
Last month, the LIC board had taken a 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 (IRDAI) 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.
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Updated Date: Oct 04, 2018 07:51:39 IST