The proposal to acquire a majority stake of 51 percent in IDBI Bank has been approved by the LIC board in its meeting on Monday.
The Department of Economic Affairs Secretary Subhash Chandra told reporters in New Delhi that the preferred option to make the purchase of the stake. He also added that an open offer may not be needed as the public holding in the bank is very low and LIC would only make the open offer if needed. A further approval by the markets regulator (securities and exchange board of India) will be required for LIC to purchase the proposed stake in the debt-ridden bank.
The insurance regulatory body IRDAI had already given its approval at the end of last month to increase LIC's stake in IDBI Bank from 10.82 percent at present to 51 percent. IDBI Bank has non-performing assets worth Rs 55,600 crore as of March 2018 and the stake sale could help it gain a capital support of Rs 10,000 to 13,000 crore.
As per Sebi's rule, the acquirer has to give an open offer to the shareholders of the target company on acquiring shares or voting rights of 25 percent or more. The government's stake of 80.96 percent in the bank will come down below 50 percent through fresh issue of equity as it was announced in the 2018 Union Budget.
The share price of IDBI Bank surged over 10 percent after the news of buyout approval came out.