IDBI Bank has appointed investment banking outfit RBSA Advisors as financial advisor for evaluating the potential of an investment proposal by LIC. On August 1, the Union Cabinet had approved the LIC’s proposed acquisition of up to 51 per cent stake in the debt-ridden IDBI Bank.
The LIC stake buy may help the bank get capital support of Rs.100-130 billion. With the acquisition of a majority stake, LIC is expected to appoint at least four members on the bank’s board, RBSA said in a statement.
The approval of the deal means LIC will raise its stake in the bank from the current 8 per cent to 51 per cent, which makes it a majority holder. According to the proposal, IDBI Bank may issue additional equity shares to LIC on a preferential allotment basis.
Rajeev R Shah, MD & CEO of RBSA Advisors, said: “The deal can strengthen the capital adequacy of the bank and can initiate a turnaround”.
IRDAI has given a go-ahead to the LIC proposal. The state-owned insurance company is expected to present a comprehensive plan to reduce its stake to 15 per cent over a period of seven years.