State Bank of India (SBI), the country’s largest lender, is planning to divest part of its stake in SBI Life Insurance by first quarter of FY2016. SBI was planning INR125 billion IPO of its insurance unit earlier this year, but the issue got stalled due to market volatility. The issue is planned to raise funds to enhance credit and meet tighter capital requirements. Bank of America Corporation and Goldman Sachs Group have been appointed as advisors to arrange the sale.
SBI Life Insurance is a joint venture between SBI and BNP Paribas Cardif – a unit of France’s biggest bank where former holds 74% and later holds 26%. Several domestic and international investors are interested in picking up a stake in the company. BNP Paribas Cardif may use this opportunity to increase its stake in the company to 36%. SBI Life Insurance has an authorized capital of INR20 billion and a paid up capital of INR10 billion. While the company’s exact valuation will be known when pricing of the IPO will be revealed, it is deemed to be approximately INR25 billion.
SBI Life collected new premiums of INR33.62 billion in April-December 2014, which was 11% increase as compared to same period of previous year. ICICI Prudential Life Insurance has the largest share on the basis of premium collection in private life insurance sector and is followed by HDFC Life and SBI Life
As the Indian parliament increased foreign investment limit in insurance sector to 49%, it allowed foreign companies to increase their presence in Indian market. Ownership and control in case of joint ventures shall be vested with resident Indians.
Additionally, ICICI Bank and joint venture partner in the life insurance, Prudential Plc, are looking to divest 5% stake in their life insurance venture. Similarly, HDFC is planning to list the insurance subsidiary.