LIC’s bid to up stake in IDBI unit blocked

Irda rejects insurer’s plan to buy 15% more in IDBI Trustee Services citing concentration of risk in one entity

The proposal to raise stake in IDBI Trusteeship had gone to the insurance regulator, and after deliberations, the regulator rejected the proposal citing concentration of risk in one entity
Mumbai: India’s insurance regulator ,Irda, has rejected Life Insurance Corporation’s bid to buy 15 per cent more stake in IDBI Trustee Services, citing concentration risk. The additional stake would have taken LIC’s exposure in the entity to 45 per cent .

“The proposal to raise stake in IDBI Trusteeship had gone to the insurance regulator, and after deliberations, the regulator rejected the proposal citing concentration of risk in one entity,” said a source in the know if the development. IDBI Bank owns 54.70 per cent stake in IDBI Trusteeship and is the largest shareholder followed by LIC, which owns 29.84 per cent , and GIC Re that has 14.92 per cent . An email to LIC did not receive a response until press time Sunday.

LIC has on earlier occasions bought stakes of banks in other companies, aiding them to raise capital in difficult times. Last year, LIC had bought a 2 per cent stake of IDBI Bank in the National Stock Exchange. The Insurance Regulatory and Development Authority of India ( Irdai) has many a times directed LIC to remain within the stipulated 15 per cent equity exposure limit in a company.

It has allowed LIC to hold on to its shareholding in companies beyond the stipulated limit where it is a strategic investor.

With gross bad loans of around 25 per cent as on September 30, IDBI Bank is in the process of selling non-core assets to free up capital. It has also decided to sell stake in non-core assets to meet regulatory capital norms.

Last week, the bank said it will sell 1.5 per cent stake in the National Stock Exchange. It has put its life insurance arm, a joint venture with Federal Bank and Aegis, on block, where it holds 48 per cent stake. IDBI Bank had sold stake in Small Industries Development Bank of India and Clearing Corporation of India. It is also in the process of selling stake in National Securities Depository Ltd and NSDL e-Governance Infrastructure, where the bank owns 30 per cent each. It owns 100 per cent stake in asset management arm, IDBI Intech and IDBI MF Trustee Co.
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“In IDBI Truesteeship, we have 54 per cent . So, we will deal with other stakeholders like LIC and find out future strategies,” M K Jain, CEO IDBI Bank, had said in an interview to ETrecently.

Jain had said that the value of non-core assets on the block could be around Rs 5,000 crore but on fair basis, they will be able to get Rs 3,500 crore.

Of this, Rs 1,500 crore worth of assets were sold in the first half and the bank expects to sell Rs 2,000 crore worth of assets in the third fourth quarters.
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