Life Insurance Corporation of India (LIC), the state-owned insurance group, has decided to acquire around 7% additional stake in IDBI Bank through a preferential issue.
The decision marks the first step to acquire controlling stake in the debt-ridden state-owned lender.
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In a regulatory filing, IDBI Bank said that it has received a letter from the LIC “giving their in principle approval for subscription of the equity shares on preferential basis subject to their total exposure not exceeding 14.90% of post issue capital of IDBI Bank at any point of time.”
LIC already owns 7.98% stake in IDBI Bank.
The IDBI Bank board is scheduled to meet on 31 August to discuss the proposal and will seek shareholders’ approval through Postal Ballot to initiate the divestment process, the statement added.
Earlier this month, the Union Cabinet of the country approved the LIC’s planned takeover of IDBI Bank.
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By GlobalDataThe IDBI Bank deal will see the government’s stake in the lender drop from 80.96% to around 45%.
The acquisition of the additional stake is expected to improve the IDBI Bank’s capital adequacy ratio which dropped below the regulatory requirement of 9%.
The lender has registered increasing loss in the first quarter of the current fiscal due to rising ratio of non-performing assets. In the first quarter, it reported a loss of INR24.1bn ($341.14m).
