Indian Economy News

IAG to raise stake in SBI insurance joint venture to 49%

  • Livemint" target="_blank">Livemint
  • March 27, 2015

Mumbai: Insurance Australia Group Ltd (IAG) is set to raise its stake in its general insurance joint venture with the State Bank of India (SBI) from 26% to 49%, in the first such instance after Parliament cleared a bill on 12 March that raised the maximum permitted foreign stake in insurance sector.

In a BSE notice, India’s largest lender SBI said, “The executive committee of the central board has today (on Thursday) decided to initiate the necessary action as per JV (joint venture) agreement for dilution of SBI’s stake in SBI General Insurance from 76% to 51% with corresponding increase of stake of IAG from 26% to 49%, including appointment of a valuer to facilitate valuation and price discovery.”

SBI could be in the process of diluting its stake in its life insurance venture as well, Bloomberg news agency had reported on 20 March.

While SBI did not comment, SBI Life Insurance Co. Ltd venture partner BNP Paribas SA had said it was open to the idea of increasing stake in the insurance venture.

In a 22 December interview with Mint, SBI’s chairperson Arundhati Bhattacharya had said the bank was looking at reducing its stake in various subsidiaries. Subsequently, on 10 March, SBI said it has sold 4%, of its total 10% stake, in credit information company Credit Information Bureau India Ltd (Cibil) for Rs.72 crore.

“We have a lot of subsidiaries which are of very good value. Insurance is there, we have a card subsidiary that is doing exceedingly well, mutual funds subsidiary is there, investment banking arm... We can always unlock that value by listing them, but then, I have to take other people along and see what they want to do. Listing would be preferred to unlock the value than exiting them,” Bhattacharya had told Mint.

Shares of SBI closed 3.18% down at Rs.256.90 on BSE, while the benchmark BSE Sensex fell 2.33% to close at 27,457.58 points. Bankex fell 2.52% to end the day at 20,445.21 points.

Some other Indian banks that have insurance joint ventures with foreign partners may also look at diluting stake in the future, but not immediately.

Domestic promoters of IndiaFirst Life Insurance, Bank of Baroda and andhra Bank, are not looking at diluting their stake in the venture in favour of the foreign partner UK’s Legal and General. “If we want we can dilute stake, but right now there is no such possibility,” said Andhra Bank’s chairman and managing director C.V.R. Rajendran.

“There is no binding clause that we will have to liquidate our stake, it’s up to us,” he added.

Andhra Bank holds 30% in IndiaFirst, Bank of Baroda holds 44% while the rest is held by the UK partner.

A senior Union Bank of India official said his bank is not looking at diluting its stake in Star Union Dai-Ichi Life Insurance.

Bank of India holds 48% in the company, while Union Bank and Japan’s Dai-ichi Life both hold 26% each.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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