Mumbai:
The Board of Directors of state-owned Life Insurance Corporation (LIC) of India is having a unscheduled board meeting on Monday in New Delhi to finalise its proposal to buy 51 per cent stakes in debt-laden IDBI Bank.
“Yes, we have called for a board meeting on Monday to decide about the IDBI Bank proposal consisting of modalities of the investment, including the valuation and timeline for the deal and structure of the new Board of IDBI Bank.The board will also decide how to absorb the IDBI Federal Life Insurance,a subsidiary of IDBI Bank ,’’ said sources at LIC.
The corporation has made elaborate arrangements in terms of presentations on funding plans and turn- around strategies and how it would progress in the entire deal. The two independent directors in the LIC board also expected to ask LIC management questions about deal's benefit for the 33 crore policy holders of the corporation as the Corporation is facing crticism that it is squandering precious policy holders' money on a financially battered bank.
However, LIC management has argued that they are getting a middle level diverisified bank with 2000 branches a at cheapr pricing.Not only the acquisition of the bank will boost LIC's banacassurance sales also it would another life insurnace and mutual fund compamy in its fold, said sources.
Normally, LIC board meets once in three months and last it had met in the third week of June to finalise its balance sheet.
The due diligence process by LIC is complete as per the directions of Insurance Regulatory and Development Authority of India (Irdai), they said.
State-owned Life Insurance Corporation will approach markets regulator Sebi after getting approval from its board,
Earlier, the board of insurance regulator, IRDAI on June 29 had already given its stamp of approval to LIC’s proposal to pick up 51 per cent in the IDBI Bank which is largely being facilitated by the government. Currently LIC has 10.82 per cent in IDBI Bank.
"The LIC-IDBI Bank deal will trigger an open offer to protect the interest of minority shareholders in the bank," said a source.
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 per cent or more.
After acquiring a majority stake in the financially battered bank the corporation intends to infuse about Rs 10,000-13,000 crore over a period of to strengthen the financial of the bank.
Earlier, Nilesh Sathe, member(Life), IRDAI, had said the insurance regulator had allowed the LIC to acquire 51 per cent of the IDBI Bank with the condition that it has to bring down its stake over a period of time to 15 per cent which is the permissible investment limit for the LIC.
“LIC has to come back to us with specific time frame when they can bring down their stakes in IDBI Bank,’’ said Sathe,
IDBI Bank has non-performing loans totalling Rs 55,588 crore as of March 2018 and is under the RBI’s Prompt Corrective Action rules. Its net loss stood at Rs 5,663 crore in the period.
Meanwhile, IDBI Bank Officers’s association on being asked by the Labour Commissioner, Mumbai, has delayed its agitation, supposed to start on 14 Aug, against the LIC’s move to acquire IDBI Bank .
Also, on 14th July under the banner of Coordination Committee of Bank, Insurance and Finance Unions (CCBIFU), a massive dharna program was conducted at all state capitals though out the country to press for various demands like, stopping FDI in banks and insurance sector and disinvestment in psu general insurance companies.
However, the employees' unions of the Life Insurance Corporation, banking industry and IDBI Bank have staunchly opposed the proposed move facilitated by the government to allow Life Insurance Corporation to acquire majority stakes in debt-laden IDBI Bank.
The IDBI Bank Officers’ Union has threatened to go on a nationwide strike between July 16-21 for expressing their opposition against the proposed move.