“We may also be required to ensure that one of our associates cease undertaking housing finance activities to comply with regulatory requirements,” it said in its draft IPO papers.
IDBI Bank became a subsidiary of LIC with effect from January 21, 2019, following LIC’s acquisition of an additional 827,590,885 equity shares in the lender. That resulted in LIC owning 51 per cent of the outstanding shares in IDBI Bank.
LIC infused Rs 4,743 crore into IDBI Bank using policyholders’ funds.
IDBI Bank later raised Rs 1,435.180 crore from an qualified institutional placement in December 2020 and since March 2021, the bank has come out of the prompt corrective action framework, subject to compliance with certain conditions and continuous monitoring.
“In light of its financial condition and results of operations, we believe that IDBI Bank does not need to raise further capital at this time. However, if IDBI Bank requires additional capital before the expiry of the applicable five-year period and it is unable to raise capital, we would be required to infuse additional funds into IDBI Bank, which may have an adverse effect on our financial condition and results of operations,” LIC said in its draft red herring prospectus under ‘internal risk factors’ section.
Shares of IDBI Bank are up 65 per cent in the last one year. At the end of December quarter, LIC owned 49.24 per cent stake in the lender. Add the government stake, the promoter group owned 94.71 per cent stake in the bank.
“Additionally, the RBI in its Approval Letter has stipulated that either IDBI Bank or LIC Housing Finance Limited, our Associates, will have to cease conducting housing finance activity within a period of five years from the date of the Approval Letter and that housing finance activity shall be conducted only by one entity. The impact of complying with this requirement of the RBI may have an adverse effect on our financial condition, results of operations and cash flows,” it said.
