IDBI Bank has put on hold its stake sale in IDBI Federal Life Insurance until completion of the lender’s ownership control to Life Insurance Corporation (LIC).
The public sector lender is awaiting final regulatory approvals for the insurance giant to acquire up to 51 percent shareholding.
“We started the sale process in the insurance joint venture, but then the LIC deal occurred. The sale process is on hold now. We will take a decision on IDBI Federal Life Insurance in consultation with LIC once it completes its investment,” said Rakesh Sharma, Chief Executive Officer and Managing Director of IDBI Bank, in its post-results press conference.
IDBI Bank holds 48 percent stake in the venture and Federal Bank and Belgian life insurer Ageas hold 26 percent each.
Earlier in 2018, when IDBI Bank was looking to sell stake in its life insurance company, Max Life Insurance and Aditya Birla Sun Life were said to be frontrunners for this acquisition. However, the deal could not go through since the parties did not agree to the terms and conditions of the process.
Due to lack of clarity on the stake sale in IDBI Bank, there was an impact on the business of its life insurance joint venture: IDBI Federal Life. From April to October period, it collected Rs 355.47 crore in new premiums, down 14 percent on a year-on-year basis.
Vighnesh Shahane, CEO & Whole-time Director, IDBI Federal Life, recently told Moneycontrol that the last 15 months have been a period of uncertainty for the company. “With the LIC-IDBI Bank deal, he said it is time to rebuild the company again…The deal will help grow the market for us as well and also improve the insurance pie for us," he added.
When it comes to the deal, Shahane said LIC is a powerful and trusted brand among policyholders.
On August 1, the Cabinet approved LIC’s acquisition of up to 51 percent stake in the financially weak IDBI Bank to revive it out of the bad loan trouble.
Additionally, LIC being the state-owned insurance firm, its ownership of IDBI Bank and thereby stake in another insurance firm IDBI Federal Life may face regulatory hurdles.
Sharma said, “We will take a view as per regulatory guidelines once the deal with LIC is complete…Once the regulatory approvals are through, the deal (LIC) will be completed soon.”
IDBI Bank will receive Rs 20,000 crore from an open offer to purchase shares from its minority shareholders. The offer, at Rs 61.73 per equity share, will kick-start around December 5 and close on December 14.
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