IDBI Bank share price slipped over 2 per cent on Wednesday after IDBI Bank board decided to seek government permission to go ahead with LIC's proposal to increase its stake in the nearly crippled bank to 51 per cent.

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Reacting to the news, the stock slipped as much as 2.5 per cent to Rs 56.75 on the BSE. It had rallied over 3 per cent to close at Rs 58.20 on Tuesday.

The LIC board gave its approval for the deal on Monday after getting an exemption from the regulator Irdai that made a clear it clear that its permission is contingent on submitting a roadmap to trim its holding to under 15 per cent over a period of time.

After the board meeting, the bank, which has the worst asset quality among all the banks with a 28 per cent bad loan pile, said it has received a letter from LIC on Monday expressing interest to increase its holding to 51 per cent through preferential allotment of shares or an open offer or a combination of both.

LIC currently owns 7.98 per cent in the bank, down from 10.82 per cent in March 2018 following an equity infusion by the government which increased its ownership to 86 per cent. The remaining shares are held by the public.

B Sriram, managing director and chief executive, IDBI Bank said the proposal has already been sent to the government and once its approval comes in, it will again go back to the bank's board for final approval.

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The bank then will have to seek approval for the deal from regulators Reserve Bank and Sebi.

From the RBI, the bank will have to get approvals for change in promoter status, substantial acquisition and the fit and proper conditions.

Once the deal is through, LIC will get the management control and will become an LIC subsidiary, Sriram said.