The LIC Board to finalize the purchase of a stake in IDBI Bank

NEW DELHI: The Behemoth LIC insurance board is scheduled to meet today to finalize the acquisition of 51 percent stake in IDBI Bank, sources said.

The LIC due diligence process is completed in accordance with the instructions of the Insurance Regulatory Authority and Development of India (Irdai), they said.

The public life insurance company will approach the Sebi market regulator after getting approval from its board of directors, which will meet in Mumbai.

Irdai has already given LIC approval for the purchase of a stake, a move that will help the indebted public bank to obtain capital support of Rs 10,000 to 13,000.

"The LIC-IDBI Bank agreement will trigger a takeover bid to protect the interests of minority shareholders of the bank," said a source.

According to Sebi's takeover code, an acquirer must make a public tender offer open to the shareholders of the target company when acquiring shares or voting rights of 25% or more.

Irdai at his meeting held in Hyderabad last month, had allowed LIC to increase its stake from 10.82 percent to 51 percent in IDBI Bank.

According to the regulations in force, an insurance company can not hold more than 15 percent of listed financial companies.

LIC was seeking to enter the banking space by acquiring a majority stake in IDBI Bank, as the agreement is expected to provide commercial synergies despite the lender's stressed record.

He will receive about 2,000 branches through which he will be able to sell his products, while the bank will receive mbadive funds from LIC.

The bank would also receive accounts from about 22 policy holders crore and subsequent cash flow.

If the transaction is concluded, IDBI Bank, which is struggling with rising toxic loans with non-performing gross badets reaching an impressive crore of Rs 55,600 at the end of the March quarter, will get the necessary financial support to revive his fortune .

During the last quarter of January-March, the lender's net loss was 5,663 crores. The government would not get the product of the stake reduction since the money would be used for the revival of the bank.

This could be done by the issuance of new capital, so that the government's share, which currently stands at 80.96 percent, is less than 50 percent, as announced in the budget.