LIC’s IDBI stake gets SEBI nod for public reclassification, but with tight post sale conditions

IDBI Bank informed the stock exchanges that market regulator SEBI has approved the reclassification of Life Insurance Corporation of India (LIC) as a public shareholder once the bank’s strategic disinvestment concludes. The approval, however, is conditional.

The Cabinet Committee on Economic Affairs had approved the disinvestment of IDBI Bank on May 5, 2021. Following this, the Department of Investment and Public Asset Management (DIPAM) conveyed SEBI’s approval for LIC’s reclassification, provided key conditions are met.

According to the disclosure, LIC’s voting rights in IDBI Bank will be capped at 10%, and it will not exercise control over the bank’s affairs either directly or indirectly. LIC will also not enjoy any special rights or board representation and must bring down its residual stake to 15% or below within two years of the transaction closure, as directed by the Reserve Bank of India.

Post-disinvestment, IDBI Bank must apply to stock exchanges for the reclassification to take effect. SEBI warned that any non-compliance would lead to automatic withdrawal of the approval.

The bank clarified that these changes hinge on other statutory and regulatory clearances as required under SEBI’s LODR Regulations, 2015.

Speaking at the BT India@100 event, DIPAM Secretary Arunish Chawla reaffirmed the Centre’s strategic disinvestment agenda and called the IDBI stake sale a landmark step for the banking sector.

On the challenges surrounding the sale, Chawla acknowledged the global macroeconomic pressures but said, “We did prepare the entire department and our public enterprise partners to ride the shock comfortably. You will see that this will pay off.”

Describing the IDBI Bank deal as the “largest disinvestment so far,” Chawla called it a strong step toward strengthening India’s financial sector as the country progresses towards its $5 trillion economy goal, with a long-term vision of reaching $10 trillion.