Has LIC become an ATM for govt? D-Street analysts fume at move to buy IDBI bank

64729128 NEW DELHI: As the board of Life Insurance Corporation of India, India’s largest life insurer, approved a proposal to take up a controlling stake in I DBI Bank, analysts and market watchers expressed shock and disapproval.“LIC equals ATM” (for the government) tweeted Sanjay Bakshi, a value investor and professor of finance at Management Development Institute (MDI) Gurgaon.Shares of IDBI Bank traded 1.19 per cent lower at Rs 58.35 on BSE at 2.34 pm on Monday."LIC does not have the skills to run a bank. Whether it will be able to provide the right leadership or guidance is something that needs to be questioned. There are other issues too, such as cap on the voting by shareholders. The government can exercise its vote, but LIC certainly cannot," said Amit Tandon, founder & MD, IIAS.The PSU insurer already owns 10.82 per cent stake in the state-run lender and would require regulatory clearance to increase it beyond 15 per cent. The insurer is said be weighing acquisition of a 43 per cent stake in the lender, ETNow quoted sources as saying.Neeraj Dewan, Director at Quantum Securities, believes the love looked like a desperate measure, but the timing of the decision may not be that bad. "You may have the capex cycle picking up slowly. When we go across corporates, they are in need of money. You saw that for Tata Steel, which has been able to get Bhushan Steel. Companies that are looking at inorganic growth or capacity expansion may lift credit demand slowly,” Dewan told ETNow. Last month, RBI brought the bank under its prompt corrective action (PCA) framework due to high non-performing assets (NPAs) and negative return on assets (RoAs).IDBI Bank reported a Rs 5,662.76 crore loss for March quarter, compared with Rs 3,199.77 crore loss reported for the corresponding quarter last year. The bank’s gross non-performing assets jumped to Rs 55,588 crore at the end of March quarter from Rs 44,753 crore a year ago. Net interest income (NII) fell 44 per cent YoY for the quarter to Rs 915.47 from Rs 1,633.29 crore in the same quarter last year.ET had reported earlier this month that the government was considering a preferential capital issue by IDBI Bank to bring its holding below 50 per cent as part of plans to transform its fortunes on the lines of Axis Bank.

from The Economic Times https://ift.tt/2K6Fdea