Union Cabinet had approved LIC's proposed acquisition of up to 51 per cent stake in debt-ridden IDBI Bank.
New Delhi: IDBI Bank on Tuesday said Life Insurance Corporation (LIC) will buy 14.9 per cent equity stake in the bank, a move that would eventually lead to acquisition of the majority stake in the state-owned lender.
In August, the Union Cabinet had approved LIC's proposed acquisition of up to 51 per cent stake in debt-ridden IDBI Bank.
LIC holds 7.98 per cent stake in the debt-ridden public sector bank, at present.
"The Bank has received a letter dated August 28, 2018 from LIC giving their in principle approval for subscription of the equity shares on preferential basis subject to their total exposure not exceeding 14.90 per cent of post issue capital of IDBI Bank at any point of time," IDBI Bank said in a regulatory filing.
The board of bank at its meeting to be held on August 31 will consider the proposal for seeking shareholders' approval through postal ballot for preferential issue of capital to LIC, aggregating up to 14.90 per cent of the bank's post issue paid up capital, it added.
Meanwhile, sources said that the stake sale would take care of the immediate need of IDBI Bank and help it meet capital adequacy norms at the end second quarter.
IDBI Bank shares had dropped sharply by more than 5 per cent to a day's low of Rs 57.85 after the announcement.
The stock, however, recovered from lows in the last hour of trade to settle down by 0.82 per cent at Rs 60.80 on BSE.
As many as 30.46 lakh shares of the bank were traded on the bourse.
The bank had posted a net loss of Rs 2,409.89 in the quarter ending June 2018. It had a Gross Non-Performing Asset (NPA) of about Rs 57,807 crore.