Excessive investment in IDBI Bank is likely to worsen LIC's financial position

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MUMBAI: Any additional investment by Life Insurance Corporation of India (LIC) in its subsidiary IDBI Bank, which is preparing for the country's largest IPO, could adversely affect the financial position of the insurance company.

The information came out in a draft red herring prospectus recently filed with market regulator SEBI for LIC's IPO.

"Given the financial position and performance, we believe that IDBI Bank does not need to raise more capital at this time," the insurer told DRHP.

If the bank needs additional capital before the expiry of the applicable five year period and it fails to raise funds, we will need to use the additional funds. However this can adversely affect our financial position and operational results. The five-year term given to IDBI Bank will expire in November, 207.

On November 3, 2016, the RBI approved the acquisition of additional equity shares in IDBI Bank by LIC. According to the DRHP, the Life Insurance Corporation had in October 2016 transferred Rs. 2 crore was invested.

On December 15, 2020, the Bank issued Rs. 15.1 crore were collected. As the condition of IDBI Bank improved, RBI removed it from the Prompt Corrective Action (PCA) framework on March 10, 2021.

The Indian Trade Union Confederation (BMS) has opposed the government's decision to bring in an IPO for the Life Insurance Corporation of India. Calling it the first step towards privatization of LIC, BMS has announced its support for the strike called by trade unions on March 4 and 5.

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