The bank's board in a meeting on Thursday approved the proposal for preferential allotment of equity shares to LIC aggregating up to 51 per cent of post issue paid up capital of the bank, IDBI Bank said in a BSE filing.
Besides, the board approved increasing authorized capital of the bank from Rs 80 billion to Rs 150 billion.
The meeting also cleared a proposal for re-classification of LIC as promoter of the bank post acquisition of 51 per cent stake in IDBI Bank, it said.
The board also approved alterations in Articles of Association of the bank.
Union Cabinet on August 1 cleared a proposal for purchase of 51 per cent controlling stake in IDBI Bank by LIC.
The bank's board Thursday also approved allotment of 339.8 million equity shares to LIC at a price of Rs 61.73 per share inclusive of premium amount of Rs 51.73 per share aggregating up to Rs 20.98 billion through preferential issue.
The allotment of nearly 340 million shares will increase LIC's stake to about 15 per cent. At present, insurance behemoth LIC holds 7.98 per cent stake in the debt-ridden public sector bank.
The bank, in which the government holds 85.96 per cent stake, had posted a net loss of Rs 24.09 billion in June quarter of this fiscal. It had gross non-performing asset (NPAs) of about Rs 578.07 billion.
The board of Insurance Regulatory and Development Authority of India (Irdai) in June permitted LIC to increase its stake from 10.82 per cent to 51 per cent in IDBI Bank.
As per current regulations, an insurance company cannot own more than 15 per cent stake in any listed financial firm.
LIC has been looking to enter the banking space by acquiring a majority stake in IDBI Bank as the deal is expected to provide business synergies despite the lender's stressed balance sheet.
With culmination of the deal, LIC will get about 2,000 branches by which it can sell its products, while the bank would get massive funds of LIC.
The bank would also get accounts of about 220 million policy holders and subsequent flow of fund.