New Delhi. Life Insurance Corporation of India (LIC) is soon going to bring the country’s largest IPO. In this there will be a big opportunity for investors to earn. To bring the IPO, such information has come out from the recently filed Draft Red Herring Prospectus (DRHP) with the market regulator SEBI, which is important to know. The matter is related to the financial health of LIC.
The DRHP states that if LIC makes any kind of investment in its subsidiary IDBI Bank, it may adversely affect the financial health of the insurance company. This will also have an impact on the IPO. In such a situation, if you are waiting for LIP to invest in IPO, then keep these things in mind before that, otherwise there may be a big setback.
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LIC’s claim… will not be a problem till 2023
The insurance company said in DRHP that in view of the financial position and operations, we believe that IDBI Bank does not need to raise any more capital at this time. But if the additional capital is required within five years of getting the approval from RBI i.e. before November 2023 and it fails to raise the funds, then we will need to infuse the additional funds. However, this may adversely affect our financial position and operating results.
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RBI’s condition made it difficult
LIC had received RBI’s approval letter on 2 November 2018 for additional equity investment in IDBI Bank. In this, a condition was laid that within five years of approval, either IDBI Bank or LIC Housing Finance will have to close the business of housing finance. The fulfillment of this condition of RBI has been feared to have a bad effect on the financial health, results and cash flow of LIC.
Bank came out of PCS last year
LIC had invested Rs 4743 crore in IDBI Bank on 23 October 2018 using the money of the policyholders. The bank had raised Rs 1435.1 crore on 19 December 2020 through Qualified Institutional Placement (QIP). IDBI Bank came out of RBI’s Prompt Corrective Action (PCA) framework with effect from March 10, 2021.
The bank became part of LIC three years ago
About three years ago on January 21, 2019, LIC had bought 82,75,90,885 equity shares of IDBI Bank. After this, the stake of LIC in the bank increased to 51 percent. After this deal, IDBI Bank became a subsidiary of LIC. But after the issue of additional equity shares by IDBI Bank in a qualified institutional placement on December 19, 2020, LIC’s shareholding in the bank has come down to 49.24 per cent. With this, IDBI Bank has now become a subsidiary of LIC.
Tags: IDBI Bank, Investment, LIC IPO, RBI, Rbi policy
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