Tag: IDBI-LIC deal

Rating IDBI Bank as private is against public interest, claims AIBEA

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The All India Bank Employees’ Association (AIBEA) has demanded the Reserve Bank of India (RBI) to reconsider its decision to categorise IDBI Bank as a private entity.

In a letter to the RBI on Wednesday, AIBEA’s General Secretary CH Venkatachalam conveyed the union’s opposition to RBI’s decision.

“IDBI and IDBI Bank have been created to be Banks under public sector. Due to huge bad loans to the corporates, the Bank has been facing the problem of recovery and consequently its financial performance,” Venkatachalam said.

According to him, it is ironical that RBI instead of taking action against the private sector corporate borrowers it seeks to protect the bank from Right to Information Act (RTI), Central Vigilance Commission (CVC) and others by recategorising IDBI bank.

“Even though Government’s stake has come below 51 per cent, LIC, which is the main share-holder is also a 100 percent Government’s corporation and hence, the re-categorisation is unwarranted and motivated against public interest,” the letter notes.

The RBI recently classified IDBI Bank as private sector bank.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Only 22% shareholders exit IDBI Bank following open offer by LIC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Only 22 percent of the minority shareholders of IDBI Bank exercised their option of exiting the company in the open offer floated by Life Insurance Corporation (LIC), which is taking majority stake in the debt ridden state-owned bank, sources said. Bulk of the minority shareholders, however, continue to hold the shares of IDBI Bank indicating their faith in the new management, they said.

Existing shareholders feel value of their shares going up substantially in the future following management takeover by LIC, the sources added.

The open offer for 2,04,15,12,929 shares was made last month at a price of Rs 61.73 a share.

LIC had already increased its holding beyond 44 percent before the open option.

In August, the Cabinet approved the acquisition of controlling stake by LIC as a promoter in the bank through combination of preferential allotment and open offer of equity.

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 the culmination of the deal, LIC 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.

IDBI Bank would get huge amount of low-cost deposits of the policy holder and it can also cross-sale products of LIC. The bancassurance would generate good amount of cash, which according to experts would push them out of red.

The bank had reported a net loss to Rs 3,602.49 crore during the September quarter of 2018-19.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Government approves LIC-IDBI deal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Cabinet on Wednesday has decided to bring its shareholding below 50 percent by dilution in IDBI Bank and has cleared the LIC-IDBI deal, sources said.

The Ministry of Corporate Affairs and the Competition Commission of India have given an in-principle nod to the deal. However, the formal nod by the companies is yet to be taken, the sources said.

As per the proposal, the debt-laden bank will issue preferential shares to Life Insurance Corporation (LIC) to raise capital. The government has allowed the relinquishment of the management control of the bank.

The LIC-IDBI deal has been approved, a source said after the meeting of Union Cabinet, chaired by Prime Minister Narendra Modi. The government is not looking for any cash benefit in from this deal, the source said.

LIC already has 7-7.5 percent stake in the bank and will acquire the remaining for majority holding.

Although, the proposed acquisition by LIC would not bring any money to the government, the bank would get capital support between Rs 10,000 crore and Rs 13,000 crore, depending on the share price of the bank.

(With inputs from PTI)

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IDBI Bank seeks government’s decision on LIC deal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Debt-laden banker IDBI Bank said it had decided to seek the government’s decision with respect to LIC acquiring a 51 percent stake in the bank, IDBI said in an exchange filing.

The board of insurance behemoth LIC approved the acquisition of 51 percent stake in IDBI Bank in a meeting held on Monday.

“Largely the three things are to try to look into the expression of interest by LIC in taking a 51 percent controlling stake to give them promoter status and also decide upon what will be the mode of infusion, whether by way of preferential issue of shares or through an open offer,” said GM Yadwadkar, deputy managing director, IDBI Bank.

“Almost 94 percent of IDBI Bank is held with the government of India and LIC, 86 percent is with government of India and 7.98 percent is with LIC of India and the balance 6 percent is with the public,” he added.

“So, this is the decision of the board. Now we will await the government’s responses on our letter to them and then depending on what is the communication from the government of India, based on their approvals we will again take it up in our board and take it forward,” Yadwadkar, further added.

“Representatives of the government are on the board of IDBI for conducting the banking business not for disposing of the bank itself. Majority shareholding in the bank is of the Central Government and Central Government approval is required for selling those shares,” said MR Umarji, former chief legal advisor, Indian Banks’ Association.

“Next step depends on the government process. It make have to go to the cabinet. If cabinet approval is already obtained the finance ministry will give its okay to IDBI Bank,” he added.

The company is expected to increase its stake in the bank via preferential shares, said Subhash Chandra Garg, economic affairs secretary, adding that the deal would require a nod from Sebi and RBI.

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.

When LIC makes a formal application for purchase of shares admitting LIC as the shareholder of the bank, IDBI’s board may have to once again approve it, said Umarji, speaking about the details of the share-acquisition.

“Once the IDBI Bank board approves the sales of shares, I don’t know whether the quantum is already stipulated or how many percentage of shares are to be sold,” he further added.

State-owned Life Insurance Corporation will now approach market regulator Sebi. As per Sebi takeover code, 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.

The move will help the debt-ridden state-owned bank get a capital support of Rs 10,000- 13,000 crore.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IDBI Bank shares recoup losses after LIC deal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of IDBI Bank recouped most their intra-day losses after the board of Life Insurance Corporation of India (LIC) approved a deal to buy a majority stake in the state-owned lender.

At 03:14 pm, shares of IDBI Bank were down 1.3 percent at Rs 56.50. The stock touched an intra-day high of Rs 59.10 before falling as low as Rs 53.30 on the Bombay Stock Exchange.

The public sector insurance behemoth’s board approved the acquisition of 51 percent stake in IDBI Bank in a meeting held on Monday.

LIC is expected to increase its stake in the debt-laden bank via preferential shares. The move will help the IDBI get a capital support of Rs 10,000- 13,000 crore.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

LIC board approves acquiring majority stake in IDBI Bank

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The board of insurance behemoth LIC approved the acquisition of 51 percent stake in IDBI Bank in a meeting held on Monday.

The company is expected to increase its stake in the bank via preferential shares, said Subhash Chandra Garg, economic affairs secretary, adding that the deal would require a nod from Sebi and RBI.

It would also need an approval from the government, added Garg.

Garg also mentioned that the deal needed to be closed in one go “otherwise the objective of getting 51%(stake) is lost”.

The due diligence process by LIC is complete as per the directions of Insurance Regulatory and Development Authority of India (Irdai), the insurance firm had said.

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.

State-owned Life Insurance Corporation will now approach market regulator Sebi. As per Sebi takeover code, 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.

“The LIC-IDBI Bank deal will trigger an open offer to protect the interest of minority shareholders in the bank,” a source was quoted by PTI.

While JN Gupta, former executive director, Sebi, said that no open offer would be required under takeover code if the promoter is the same.

However, he said if the acquisition is via issue of preferential shares, then the open offer may have to be made.

DK Mittal, former financial services secretary said that RBI should insist on getting all the money from the deal in one go and that the central bank must prescribe divestment road map with regards to LIC’s holdings in various banks.

The move will help the debt-ridden state-owned bank get a capital support of Rs 10,000- 13,000 crore.

(With inputs from PTI)

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

LIC’s stake buy in IDBI Bank may not need Parliament nod

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The proposed 51 percent stake purchase by insurance major Life Insurance Corporation in IDBI Bank may not require Parliament’s approval as it does not require any changes in the LIC Act, sources said.

Since it is going to be a financial deal as per the LIC Act, the legislation would not require amendment, sources said.

However, sources said, it would need cabinet approval if the proposed deal gets all regulatory approval.

Although, the proposed acquisition by LIC would not bring any money to the government, the bank would get capital support between Rs 10,000 crore and Rs 13,000 crore depending on the share price of the bank.

The bank intends to issue fresh shares so that LIC stake goes up to 51 percent. Simultaneously, government stake will come down from the existing 80.96 percent.

Following the issuance of preference shares to LIC, IDBI Bank will shed its character of PSU lender.

Last week, Irdai permitted insurance behemoth LIC to acquire up to 51 percent stake in state-owned IDBI Bank, a development that will help convert the debt-ridden lender into a private sector entity.

The Insurance Regulatory and Development Authority of India (Irdai) permission help LIC increase the current stake from 10.82 percent to 51 percent in IDBI Bank.

A possible scenario would be the insurance major making IDBI Bank as a subsidiary on the line of its housing finance and mutual fund businesses. According to the sources, there would be business synergies in case the LIC-IDBI Bank deal materialises.

In his Budget speech for 2016-17, then Finance Minister Arun Jaitley had said the process of transformation of IDBI Bank has already started. “Government will take it forward and also consider the option of reducing its stake to below 50 percent,” he had said.

State-owned 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 into their account.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IRDA likely to grant exemption to LIC to invest more than 15% in IDBI Bank

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Insurance Regulatory and Development Authority of India (Irdai) is likely to give its approval for the IDBI Bank-LIC deal in today’s meeting, paving way for capital infusion of Rs 130 billion, said sources.

According to the sources, the board is expected to grant exemption to LIC for investing more than 15 percent in IDBI Bank.

An insurer is not allowed to hold more than 15 percent equity stake in any company. Hence, IRDA nod is mandatory for the insurer to invest more than 15 percent.

LIC’s holding in IDBI Bank stood at 10.82 percent till March 31.

With the company now planning to buy additional 30 percent stake in the bank, its holding would cross 40 percent mark.

LIC may get three board seats as a part of the transaction, however it may not be given management control post the deal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow