Life Insurance Corporation (LIC), the largest life insurer in India, has finalised the deal with IDBI Bank, which will eventually pave way for the infusion of Rs 13,000 crore in the NPA-mired state-run bank, ETNow reported. The lender will make a preferential allotment of shares to LIC, the report said.
Post this deal, the government's stake in IDBI Bank will fall below 51 per cent, the report added.
IRDA is likely to clear the proposal today. The insurance regulator may give LIC exemption from 15 per cent investment cap.
The government currently holds an 80.96 per cent stake in the bank and the deal may involve both real estate and non-core entities of IDBI Bank valued at around Rs 14,000 crore. LIC has a 10.82 per cent stake in the state-run lender, according to an ET report.
The current market valuation of IDBI Bank, at around Rs 24,000 crore, does not reflect its inherent value, a senior government official told ET. "The bank has real estate worth around Rs 7,000 crore and also non-core assets of a similar amount. The bank is in the process of a turnaround and will post profits soon," the official said.
The proposal is part of a plan to professionalise the state-owned lender using the Axis Bank model, which has been mooted for a long time. One of the reasons why the government is looking at a state-owned investor is that the bank's valuation is distressed.
IDBI Bank posted a loss of Rs 5,662.76 crore for the quarter ended March 31. It had posted a net loss of Rs 3,199.77 crore in the corresponding quarter last year. Percentage of net NPA jumped to 16.69 per cent against 16.02 per cent on a quarter-on-quarter basis. It was at 13.21 in Q4FY17.
Amount of gross non-performing assets jumped to Rs 55,588.26 crore against Rs 44,752.59 crore on year-on-year basis.
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