Moneycontrol
Last Updated : Jul 11, 2018 01:26 PM IST | Source: Moneycontrol.com

LIC open offer buzz: IDBI Bank stock jumps 10%

The rally was in addition to more than 10 percent upside in previous two consecutive sessions, taking total this week's gains to more than 21 percent.

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IDBI Bank share price rallied 10 percent intraday on Wednesday on reports that there could be open offer from country's largest insurance company LIC.

The rally was in addition to more than 10 percent upside in previous two consecutive sessions, taking total this week's gains to more than 21 percent.

The insurance behemoth will make an open offer to minority shareholders of IDBI Bank in which it proposes to acquire up to 51 percent equity, PTI said quoting sources.

The state-owned life insurer will approach market regulator Sebi after getting approval from its board for acquiring stake in the state-owned bank.

But SEBI Chairman Ajay Tyagi confirmed to CNBC-TV18 that the market regulator has not received a proposal from LIC w.r.t open offer for IDBI Bank deal. "We will consider LIC's proposal w.r.t IDBI Bank deal once it reaches us."

Insurance regulator Irdai has already given its approval to LIC for the stake purchase, a move which will help the debt-ridden bank get a capital support of Rs 10,000-13,000 crore.

"The LIC-IDBI Bank deal will trigger an open offer to protect the interest of minority shareholders in the bank," sources said.

As per SEBI takeover code rules, an acquirer has to give an open offer to the shareholders of target company on acquiring shares or voting rights of 25 percent or more.

According to sources, the board of Insurance Regulatory and Development Authority of India (Irdai), at its meeting held in Hyderabad last month, 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 firms.

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.

For LIC it will get about 2,000 branches through which it can sell its products while the bank would get massive funds of LIC. The bank would also get accounts of about 22 crore policy holders and subsequent flow of fund.

If the deal goes through IDBI Bank, which is grappling with mounting toxic loans with gross non-performing assets rising to a staggering Rs 55,600 crore at the end of latest March quarter, will get much needed capital support to revive its fortune. During the period, the lender's net loss stood at Rs 5,663 crore.

The government would not get the proceeds from the stake reduction as the money would be utilised for the bank's revival. It could happen through issuance of fresh equity so that the government's stake which is presently at 80.96 percent would come down below 50 percent as announced in the Budget.

At 13:05 hours IST, the stock price was quoting at Rs 56.95, up Rs 3.75, or 7.05 percent on the BSE.

(With inputs from PTI)
First Published on Jul 11, 2018 01:26 pm
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