Australia's IAG will sell its 26 percent stake in SBI General Insurance to Premji Invest and Warburg Pincus.
SBI General is a joint venture between State Bank of India (SBI) and Insurance Australia Group (IAG). SBI and IAG currently own 70 percent and 26 percent stake, respectively, in the non-life insurer.
IAG has been part of the joint venture since 2009. Sources peg the deal size around Rs 3,500 crore. The sale will be made via two transactions, with Premji Invest and Warburg Pincus acquiring 16.01 percent and 9.99 percent stake, respectively.
The transactions are subject to regulatory processes and approvals.
Moneycontrol first reported on October 10 that a PE consortium of Azim Premji’s PremjiInvest and Warburg Pincus would pick up IAG’s 26 percent stake in SBI General Insurance.
Upon completion of the transaction, SBI will continue to hold 70 percent and Napean Opportunities LLP (an affiliate of Premji Invest) will hold 16.01 percent stake. The other shareholders would be WP Honey Wheat Investment, with 9.99 percent stake; PI Opportunities Fund-1: 2.35 percent and Axis New Opportunities AIF – I: 1.65 percent.
Explaining the rationale for the deal, Dinesh Kumar Khara, Managing Director, (GB&S), SBI said the general insurer has a high-quality management team having an institutional framework with systems and processes in place. This, he said, is demonstrated through consistent high growth and positive underwriting results. He added that IAG has progressively collaborated with SBI in building SBI General to the level where it stands today.
SBI General's profit after tax dropped to Rs 75 crore in Q1 FY20 compared to Rs 113 crore in Q1 FY19. Its market share increased to 3.11 percent from 2.70 percent last year. The insurer collected gross direct premium of Rs 1,277.31 crore in Q1 FY20, a year-on-year growth of 26.56 percent.
Peter Harmer, Managing Director and Chief Executive Office, IAG, said with their sharpened focus on core territories of Australia and New Zealand, now is the right time for IAG to exit its investment in SBI General.
The initial plan was for SBI General to be listed in FY21. However, SBI Chairman Rajnish Kumar said they have shelved the IPO plan as there was no immediate need for capital.