New Delhi, Sep 4: Department of Economic Affairs Secretary Subhash Chandra Garg on Tuesday hinted that the Life Insurance Corporation (LIC) may seek regulatory exemption from making an open offer to minority shareholders of state-owned IDBI Bank.
“They (LIC) are exploring an open offer. It will either be exemption otherwise an open offer,” Garg, who is a member on the board of LIC, told reporters. The LIC board meeting was held in the national capital on Tuesday to take necessary decisions supporting their plan to acquire 51 per cent stake in IDBI Bank.
Garg said the Securities and Exchange Board of India (Sebi) will take a call on the open offer.
As per the Sebi’s takeover code, an acquisition of more than 25 per cent in a listed entity is termed as control and requires an open offer.
Under this arrangement, the acquiring company must make an offer to existing shareholders to buy an additional stake in the company. It is aimed at providing the shareholders an exit option, as there may be a management change after acquisition and investors may perceive potential risks in the business.
LIC is also in the process of picking up an additional 7 per cent stake in IDBI Bank through preference shares. With this, its total holding in the bank would rise to 14.9 per cent. At present, LIC holds 7.98 per cent stake in the public sector bank.
The Insurance Regulatory and Development Authority board, at its meeting held in June, had 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 in any listed financial firm.