State-owned Life Insurance Corporation could pick up a large stake to become a strategic investor in IDBI Bank as the government looks to disinvest its equity holding in the lender. The finance ministry has held discussions with LIC to explore the possibility of LIC raising its stake in IDBI Bank to 51 per cent from a little over 10 per cent at March-end, a government official aware of the discussions said. As per LIC’s internal estimates, the deal may cost around Rs 10,000 crore. Even as discussions have been held in this regard, LIC is expected to take the proposal to its board for approval only after getting a clearance from the finance ministry, government sources said. While the government has explored the possibility of LIC raising its stake up to 51 per cent in the lender, the deal is not final yet and the finance ministry may chose to sell its stake in IDBI Bank to a clutch of investors including the LIC, sources said. “LIC has presented to the government a number of synergies and mutual benefits that such a deal will entail. The LIC board has in the past approved the Corporation’s plan in taking a controlling stake in a bank,” another government official said. The Corporation’s arm LIC Housing Finance has in 2014 applied for a universal banking licence with the Reserve Bank of India. The RBI, however, chose IDFC Bank and Bandhan Bank for granting the licence out a list of over two dozen applicants. LIC owns 40.31 per cent stake in its housing finance arm. The government has been trying to privatise IDBI Bank in the past couple of years but mounting losses and rising bad loans at the lender made it difficult. For the year ended March 31 2018, IDBI Bank’s Gross NPA rose to 27.95 per cent, up from 21.25 per cent as on March 31, 2017. The bank reported net loss of Rs 8,238 crore in 2017-18, up from Rs 5,158 crore in 2016-17. IDBI Bank raised a total of Rs 4,408 crore in 2017-18 from sale of stake in non-core assets including stake sales in CCIL, SIDBI, NSE and NSDL E-Governance Ltd. Queries sent to LIC and the finance ministry on Friday seeking comments for the story did not elicit any response. Unlike in the other public sector banks, the government can pare its stake below 50 per cent in the IDBI Bank as the lender is not governed by the Bank Nationalization Act. The Central government owns 80.96 per cent equity in IDBI Bank as on March 31, while LIC holds 10.82 per cent stake in the bank as on March 31, according to the latest shareholding pattern available with the Bombay Stock Exchange. But after the government’s capital infusion of Rs 7,881 crore in May, its stake went up to 85.96 per cent in IDBI Bank. Similarly, LIC’s stake in IDBI Bank would have got diluted in proportion to the fresh equity issuance by the bank. In acquiring majority stake in IDBI Bank, it is not immediately clear how LIC will overcome the hurdle of current regulations which do not permit it to own more than 15 per cent equity in a single company.
