LIC-IDBI deal: Insurance board to meet today to decide on 51% stake hike plan, timeline, strategy

New Delhi: The LIC board will meet on Tuesday (today) to decide on the modalities for increasing stake in debt-ridden IDBI Bank to 51 percent, a move that will provide the insurance behemoth entry into the banking space. The board will discuss a timeline for the open offer, board-level appointments and future strategy for revitalising IDBI Bank, sources said. Besides, sources said, the board will also authorise Life Insurance Corporation of India (LIC) to appoint a merchant banker and a legal advisor to carry out the acquisition process. The board will also ask the insurer to do the due diligence of the bank and then proceed for various regulatory clearances, sources added. [caption id=“attachment_5102601” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] Meanwhile, LIC is in the process of picking up an additional 7 percent stake in IDBI Bank through preference shares. With this, total holding in the bank would rise to 14.9 percent. At present, LIC holds 7.98 percent stake in the public sector bank. The stake increase by LIC will help the lender to meet the intimidate capital requirement that will enable IDBI Bank to meet regulatory norms at the end of second quarter. In August, the Union Cabinet had approved LIC’s proposed acquisition of up to 51 percent stake in debt-ridden IDBI Bank. 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 ending June 2018. It had a gross non-performing asset (NPA) of about Rs 57,807 crore. The board of Insurance Regulatory and Development Authority of India (IRDAI), at its meeting held in Hyderabad in June, had permitted LIC to increase its stake from 10.82 percent to 51 percent in 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 by which it can sell its products, while the bank would get massive funds of LIC.