LIC which has long been dreaming of entering the banking sector has agreed to buy IDBI Bank. Although this has brought cheer among investors of IDBI bank, the question comes that is this deal really worth for LIC or the marriage is more of arranged one?
It would be difficult to figure out why an insurer giant would like to take a company like IDBI Bank which is already facing NPA problems and would require large amount of capital infusion. Further, LIC’s argument that IDBI bank would help in cross selling of LIC’s insurance products also seems to make little sense as it could anytime tie-up with large banks for the same. Further with buying of IDBI bank, the insurance giant is moving into an uncharted territory whereas a steeper fall in market share is observed in its insurance business itself from 84% five years ago to 74% in March 2018. This means that in coming days it would require more capital to save its market share from private players.
Also insistence by LIC to SEBI for relaxing the open offer clause supports the view that the marriage is an arranged one. Whether this arrange marriage can become a successful one is a question which only time can answer. However, the matter is surely complicated as of now!!!!