INSUBCONTINENT EXCLUSIVE:
MUMBAI: One of the sweeteners to comfort the policy holders in the LIC-IDBI Bank deal is that the insurer would bring down its stake in
future, though no time frame is specified
If history is any indication, it may take more than 15 years for LIC to pare its stake in IDBI Bank to meet regulatory requirements.
LIC
owned 27 per cent of Corporation Bank in 2002 with an intention to take over the lender
But the regulators then rejected the plan
And it had taken 16 years for LIC bring its stake down to 13.5 per cent, regulatory filings show
to purchase 51 per cent stake in IDBI Bank has drawn criticism from experts as it raises many risks for the insurer
The regulator had to waive off prudential investment norms to facilitate the transaction that has triggered debate whether the bending of
rules for one transaction would expose them to similar demands.
LIC had bought 27.02 per cent in Corporation Bank in 2002 for Rs 99.67
apiece, according to ET Database
It reduced its stake to 13.03 per cent at the end of March 31, 2018, valuing its stake at around Rs 540 crore
Although details of whether the investment led to profits beating the market is not clear, but it once sold 1 per cent which might have
resulted in a profit of Rs 15 crore, data show
pending approval from the Reserve Bank of India and the capital market regulator
The approval is given with an understanding that LIC will reduce its stake in the bank going forward and bring it down to the regulatory
requirement of 15 per cent
The stake buy will be in tranches through new share sales at a price determined by a regulatory formula.
Although some are reluctant about
to buy an additional 43 per cent stake in the bank which has the highest bad loans among big banks.
