LIC Makes Open Offer To IDBI Bank Shareholders

LIC makes open offer to IDBI Bank at a price of Rs 61.73 per share.

The LIC building at Nariman Point. (Source: Company Website)
The LIC building at Nariman Point. (Source: Company Website)

Life Insurance Corporation on Thursday came out with an open offer for acquiring 26 percent stake in IDBI Bank Ltd. worth about Rs 12,602 crore.

The offer has been made at a price of Rs 61.73 per share, according to a stock exchange filing by IDBI Bank. LIC has proposed to acquire more than 204 crore equity shares of Rs 10 each of state-owned lender.

Earlier in the day, the IDBI Bank board approved the proposal for issuance of preferential shares in favour of LIC with a view to increase the share of insurer in the bank up to 51 percent.

LIC made a public announcement for the open offer to shareholders, including retailers, as per the Securities and Exchange Board of India’s substantial acquisition and takeover regulations.

The IDBI Bank board has approved the preferential allotment of equity shares to LIC aggregating up to 51 percent of post issue paid up capital of the bank, it said in a regulatory filing.

The offer price will be paid in cash.

The board of directors of the target company (IDBI Bank) in their meeting held on Oct. 4, 2018 have authorised the preferential allotment representing up to 51 per cent of the fully diluted voting share capital (preferential issue) in favour of the acquirer (LIC) along with the acquisition control
IDBI Bank Filing

The government has already approved the proposal of LIC to increase the stake in IDBI Bank. The board of Insurance Regulatory and Development Authority of India in June permitted LIC to increase its stake from 10.82 percent currently. IDBI Bank board today also approved increasing authorised capital of the bank from Rs 8,000 crore to Rs 15,000 crore.

The meeting also cleared a proposal for re-classification of LIC as promoter of the bank post acquisition. The board also approved alterations in Articles of Association of the bank.

The bank, in which the government holds 85.96 percent stake, had posted a net loss of Rs 2,409.9 crore in June quarter of this fiscal. It had gross non-performing asset of about Rs 57,807 crore.

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 culmination of the deal, LIC will get about 2,000 branches by which it can sell its products, while the bank would get access to the funds of the insurer.

The bank would also get accounts of about 22 crore policy holders and subsequent flow of fund.