LIC Expected To Receive ₹26,439 Crore From IDBI Bank Stake Sale; CEO Doraiswamy Explains Future Investment Plans And Banking Ambitions

Life Insurance Corporation of India (LIC) may further reduce or completely exit its remaining stake in IDBI Bank after the proposed strategic divestment, depending on the lender’s growth prospects and potential for share price appreciation, managing director and CEO R Doraiswamy said.

The insurer expects to receive ₹26,439 crore from the sale of its 30.24% holding, with the Centre approving the divestment of a combined 60.72% stake to Fairfax Financial Holdings for ₹52,878 crore.

LIC May Reduce IDBI Bank Stake To 15%

Under the proposed transaction, LIC will initially retain a 19% stake in IDBI Bank. However, it is required to bring this down to 15% within two years under regulatory requirements.

Doraiswamy said that LIC has not yet decided whether it will retain the remaining 15%, reduce its holding further or eventually exit completely.

He said the decision would depend on the bank's future performance and the scope for further appreciation in its share price. LIC could hold anywhere between 15% and zero, depending on its assessment of the lender.

The insurer acquired its IDBI Bank shares at around ₹61 apiece. The proposed divestment price stands at ₹81 per share.

At 11:04 AM on Monday, IDBI shares were trading at ₹79.28, down 0.73%, while LIC shares were trading at ₹395.80, down 0.26%.

LIC had entered the bank in 2018 when it was struggling for capital. Its investment came from the participating fund, meaning realised gains from the transaction will benefit participating policyholders. The proceeds will be reinvested in equity and fixed-income instruments and could support policyholder bonuses or liabilities.

How Has IDBI Bank Performed Under LIC?

When LIC took control, IDBI Bank's gross non-performing asset ratio was around 30%. The lender has since returned to profitability, reporting profits from FY21 onwards and exiting the Reserve Bank of India's prompt corrective action framework.

It also declared a dividend two years ago. Doraiswamy said LIC was pleased to have supported the bank's turnaround and helped it return to a stronger financial position.

LIC Still Interested In Banking Business

Despite the planned divestment, LIC has not given up on its ambition to enter the banking business. Doraiswamy said the insurer wants to develop into a broader financial conglomerate, but current regulations do not allow insurance companies to promote banks.

He added that LIC could reconsider the possibility if regulations change. LIC Housing Finance may also explore acquiring a bank, subject to the provisions of the Banking Regulation Act.

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