LIC may make open offer soon to buy outstanding shares of IDBI Bank

LIC had on Monday agreed to raise its stake in IDBI to 51% from 8% by paying about Rs 130 billion

Life Insurance Corporation of India may make an open offer as early as Tuesday to buy the outstanding shares of IDBI Bank Ltd from minority shareholders, said people familiar with the matter.

IDBI’s board will approve a preferential sale of shares to LIC at a meeting on Tuesday and probably inform the stock exchange of the decision and the open offer, the people said, asking not to be identified as the information is private. LIC had on Monday agreed to raise its stake in IDBI to 51 per cent from 8 per cent by paying about Rs 130 billion ($1.9 billion).

While India’s regulator mandates an open offer to buy out remaining shareholders when an entity acquires 25 per cent or more of a listed firm, an open offer for IDBI may or may not happen given its low public holdings, Economic Affairs Secretary Subhash Chandra Garg said Monday. LIC and the government together hold about 94 per cent of IDBI Bank.

Finance Ministry spokesman DS Malik declined to comment. A spokesman for LIC didn’t reply to an email and phone call. An IDBI representative didn’t immediately reply to a phone call. Shares of IDBI Bank, which surged as much as 6.2 per cent, gained 3 per cent at 2:41 pm in Mumbai.

“Majority stake acquisition by the largest local investor and insurance company in India has restored investors’ confidence in IDBI Bank to an extent,” said Soumen Chatterjee, head of research at Guiness Securities Ltd. “Moreover, we believe that the NPA cycle is very close to being over.”

Non-performing assets at IDBI Bank stood at 28 per cent as of March 31, the highest among the nation’s lenders, while profitability, as measured by return on assets, dropped to a negative 6.68 per cent, filings show.