BNP Paribas Cardiff exploring mega block deal in SBI Life Insurance; stake valued at Rs 4,300 crore

French insurer BNP Paribas Cardiff is evaluating the sale of its 5 percent stake in  SBI Life Insurance via a proposed block deal, multiple sources with knowledge of the matter told Moneycontrol. Based on the market cap at the end of day’s trade on December 4, 2020, the 5 percent stake held by the French firm was valued at Rs 4,312 crore.

The global insurance giant which is a specialist in personal insurance and had gross written premiums of 29.8 billion euro in 2019 has been gradually paring its stake in SBI Life Insurance over the last two years. If deal talks fructify, this would nearly mark the exit of the global insurance giant from the top domestic insurer after a tie-up which has lasted for almost two decades.

“These are early days and currently pitches are going on with investment bankers for the block deal and as of now there is no clarity on the launch timing. Since the valuations are rich and the prices are higher, it seems like a commercial call by BNP Paribas Cardiff,” one of the individuals cited above told Moneycontrol. The SBI Life Insurance stock has risen by 8 percent in the last month from Rs 792.45 to Rs 862.55 at the end of day’s trade on December 4, 2020.

In June 2019, BNP Paribas Cardiff had offloaded 2.5 percent stake in SBI Life Insurance for about Rs 1,625 crore. Earlier, In March 2019, it had sold 5 percent and 9.2 percent for Rs 2,889 crore and Rs 4,751 crore, respectively, in the life insurer.

“Block deals are quicker than the OFS (offer for sale) route.  Post the stake sale, they can write to market regulator Sebi to declassify them as promoters,” this individual added. BNP Paribas Cardiff which currently holds a total of 5.20 percent stake falls in the promoter category along with State Bank of India which holds 55 percent stake.

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In July 2020, insurance regulator IRDAI  had said that sale, purchase, and pledge of equity in excess of 5 percent of an insurance company's paid-up capital will require its prior approval, and any violation of the guidelines will attract action.

“There is solid demand in the market for the insurance sector. SBI Life Insurance is a high-quality company and on the back of a successful block by Standard Life in HDFC Life Insurance, it’s a good time for such a deal,” said a second person familiar with the ongoing discussions. UK’s Standard Life, one of the promoters of HDFC Life Insurance had raised nearly Rs 1770 crore through a block deal launched earlier this week.

A third individual confirmed the plans of BNP Paribas Cardiff to sell the remaining stake via a block deal. “ Pitches are on to get bankers on board for this deal. There is a lot of liquidity floating around in the market and this transaction should get done comfortably. There is no strategic intent left anymore for BNP Paribas Cardiff,” this third individual added.

All the three individuals cited above spoke to Moneycontrol on the condition of anonymity.

In response to an email query from Moneycontrol, SBI Life Insurance said, “As a company policy we do not comment on market speculations.”

Moneycontrol has sent an email query to BNP Paribas Cardiff along with reminders and is awaiting a response from the firm. This article will be updated as soon as we hear from them.

SBI Life Insurance was set up in 2001 as a joint venture between the State Bank of India and BNP Paribas Cardiff. It debuted on the domestic bourses in October 2017. Commanding an individual market share of 11.7 percent at the end of the first half of this fiscal year, the firm is a market leader and has recently seen an improvement in business premium, policy retention and the ULIP business.  A report by brokerage firm Motilal Oswal said, “We expect SBI Life Insurance to continue to deliver good persistency and renewal growth. At the same time, it should maintain its cost leadership.”

BNP Paribas Cardiff is a leading global player in bancassurance partnerships and creditor insurance. It co-creates solutions with almost 500 partner distributors in a variety of sectors (including banks and financial institutions, automotive sector companies, retailers, telecommunications companies, energy companies among others), as well as financial advisors and brokers who market the products to their customers. It has a presence in 33 countries and strong positions in three regions – Europe, Asia and Latin America.