With the passage of the insurance foreign direct investment Bill, the market expected many insurance players to rush to hike stake to 49%. CNBC-TV18 learns from sources that Met Life is set to grab this boost from the government by hiking its stake in its insurance joint venture with PNB, Met Life PNB Insurance.
While Met Life holds 26% in the JV, PNB is the largest shareholder with a 30% stake. Sources say MetLife is in the process to offer the other investors in the firm an option to sell their stake. At the time of formation of the joint venture, Shapoorji Pallonji J&K Bank and other investors which included FIIs and mutual funds had invested in the firm.
Sources say Shapoorji Pallonji is ready to sell its 15% stake in the company and J&K, its 5.3% stake, to Met Life at a premium of 10% to their purchase price of Rs 36/share. The remaining 3-3.5% will come from FIIs, say sources. Since Shapoorji Pallonji & J&K are the larger shareholders, they are leading the talks with Met Life to sell an entire bulk amount of 13 percent.
Post the completion of the sale, sources add that Met life, being the largest shareholder will invest an additional USD200-500 million in the JV to expand its footprint in India.
When contacted, a Shapoorji Pallonji spokesperson said: "As per policy we do not comment on business portfolios"
J&K Bank has initiated in the process to sell its 5.3 percent stake in PNB MetLife and is looking at a valuation of about Rs 700 crore, chairman and CEO Mushtaq Ahmad told CNBC-TV18 in an interview.
Ahmad said the bank will approach MetLife for picking up its stake as the foreign partner (it currently owns 26 percent) has a first right of refusal.
Below is the transcript of the interview on CNBC-TV18.
Reema: Is there any truth to this, have you been approached by PNB Metlife to divest the J&K Bank stake in PNB Metlife?
A: We have started the process of our sale of stake. PNB Metlife and we have started the early process. First of all we will just arrive at the right value and for that process has been initiated and almost it is in the final stage. Once we do that part then we will offer Metlife because they have the first right for the stake. Once we do that, thereafter we will go to person who are interested in purchasing.
Ekta: You have been quite keen or there have been reports in the past about you’ll selling or being interested in selling this over 5 percent take that you hold in PNB MetLife. In the past the valuations which were spoken about in the public domain were maybe around Rs 700 crore. Would that still stand or does MetLife have an option, a predetermined value which they will possibly buy the stake at?
A: I think once we are going for the process for evaluating the right value and thereafter we would offer that to MetLife on that price. It would not be something like that there would be something predetermined; we have not so far arrived at the right value. However, I must also add here that two or three years back when we had sold are 5 percent at that time the value was Rs 36.50 per share for the face value of Rs 10 per share and this time definitely there has been quite a lot of value addition and we are expecting better price at the moment.
Ekta: The valuations themselves for the insurance space have risen especially for the life insurance space and post the 49 percent FDI coming through. What is the maybe premium that you would like to see on your over 5 percent stake, a ballpark internal figure that you might be working with if you could share that with us?
A: I would say that I would not like to speculate on that. However, it should be somewhere around Rs 70 per share.
Ekta: Rs 70 versus Rs 36 that you sold it at in the past?
A: Yes.
Reema: Since the process of discovering the valuation is in the final stage do you think this whole process of selling the stake either to MetLife or any other interested buyer could take place in FY16 and you could recognise the value in this fiscal year itself?
A: I have already been maintaining that we will be looking for the right time and right price and once that comes we will do it.
Ekta: Does PNB have an option besides MetLife, only MetLife has the first option but is PNB also interested in raising stake or buying out the stake from you?
A: Basically the agreement has been with MetLife and we will examine what type of right is available to Punjab National Bank (PNB).
Ekta: Are you aware whether Shapoorji Pallonji is looking to sell its entire or partial stake as well?
A: I would not be in a position to say something with accuracy but we have also been hearing that.
Reema: If the price hypothetically is Rs 70 per share how much would you get for your 5.3 percent stake?
A: We are holding around plus 10 crore shares so it should be around Rs 700 crore.
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