 "SBI to divest part of stake in life and general insurance ventures")
State Bank of India (SBI), the country's largest lender, is planning to divest part of its stake in its life and general insurance ventures.
"Both domestic and international investors have shown interest in picking up stake in the life and general insurance ventures... the joint venture partners in these ventures also want to hike their stake," said Arundhati Bhattacharya, chairman, during a conference call after the third quarter results were declared on Friday.
She added the bank was not planning to list the insurance ventures for at least the next six months. SBI holds 74 per cent stake in the life and general insurance ventures, while the joint venture partners hold 26 per cent. SBI General Insurance is a joint venture between SBI and Insurance Australia Group. SBI Life Insurance is a joint venture between SBI and BNP Paribas Cardif.
During April-December 2014, SBI Life collected new premiums of Rs 3,362 crore, up 11 per cent compared to the year-ago period, according to data from Life Insurance Council. On the basis of premium collection, ICICI Prudential Life Insurance was the largest player in the private life insurance sector, followed by HDFC Life and SBI Life.
The initial public offering (IPO) space is set to see a lot of action with banks and large non-banking financial companies-led insurers setting the ball rolling on stake sale. Analysts believe divestment of stake before hitting the capital markets will help these firms attain appropriate price discovery at the time of listing.
ICICI Bank and its joint venture partner in the life insurance company, Prudential Plc, are looking to divest five per cent stake in the life insurance company, according to reports. The life insurance company collected Rs 3,586 crore in new premiums in the April-December 2014 period, according to Life Insurance Council data, which is a 40 per cent growth over the year-ago period. This was on the back of a strong growth in their business from unit-linked plans.
A stake sale of a small quantity is considered the first step to a listing goal by a company. Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services, explained that price discovery through a fund is far more scientific than doing it through the open market. "Analysts at these funds are at a far better position to determine the price and they do their own due diligence on the books," he added.
Analysts believe the sale in insurance ventures might also help free up some additional capital that the banks will need in order to meet the Basel-III requirement norms by March 2019.
According to a Fitch rating report, banks will need $200 billion additional capital over the next five years to meet Basel-III norms for capital adequacy and the demand for funds as growth picks up.
According to data from the Reserve Bank of India (RBI), between March and September 2014, the total capital and risk weighted assets of scheduled commercial banks increased 1.9 per cent and 4.1 per cent, respectively. This has resulted in a decline in the capital adequacy ratio from 13 per cent to 12.8 per cent.
Experts also believe that if ICICI Prudential Life and HDFC Life stake sales and listings receive a good response, then others wil follow suit.
"ICICI Prudential Life and HDFC Life have been very clear on their strategy. And this is something that had been outlined as well. Once this happens, then other players are going to follow suit, hopefully by next year," said an analyst requesting anonymity.
A former committee at the insurance regulator's office had also identified the bank-led players including ICICI Prudential Life, HDFC Life, SBI Life apart from others such as Bajaj Allianz and Reliance Life as the prospective candidates that could go for an IPO in the first stages.
In December 2014, Housing Development Finance Corporation (HDFC) had said Azim Premji Trust would buy 0.95 per cent stake in its life insurance venture, HDFC Life, for Rs 198.9 crore. The deal valued HDFC Life at Rs 19,890 crore.
HDFC has concluded the sale of the first tranche of 11 million shares. After the entire sale of equity shares is completed, the company will hold 71.42 per cent of the total issued and paid-up equity capital of HDFC Life.
According to Insurance Regulatory and Development Authority of India norms, a company has to be in the insurance business for 10 years to be eligible to list on the equity market. The regulator considers the financial performance, capital structure after offer and solvency margin, among other factors, to give its nod.
"Both domestic and international investors have shown interest in picking up stake in the life and general insurance ventures... the joint venture partners in these ventures also want to hike their stake," said Arundhati Bhattacharya, chairman, during a conference call after the third quarter results were declared on Friday.
She added the bank was not planning to list the insurance ventures for at least the next six months. SBI holds 74 per cent stake in the life and general insurance ventures, while the joint venture partners hold 26 per cent. SBI General Insurance is a joint venture between SBI and Insurance Australia Group. SBI Life Insurance is a joint venture between SBI and BNP Paribas Cardif.
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The net profit of SBI Life Insurance rose 13.6 per cent during the April-December 2014 period to Rs 615 crore. SBI said SBI General Insurance would break-even in FY16.
During April-December 2014, SBI Life collected new premiums of Rs 3,362 crore, up 11 per cent compared to the year-ago period, according to data from Life Insurance Council. On the basis of premium collection, ICICI Prudential Life Insurance was the largest player in the private life insurance sector, followed by HDFC Life and SBI Life.
The initial public offering (IPO) space is set to see a lot of action with banks and large non-banking financial companies-led insurers setting the ball rolling on stake sale. Analysts believe divestment of stake before hitting the capital markets will help these firms attain appropriate price discovery at the time of listing.
ICICI Bank and its joint venture partner in the life insurance company, Prudential Plc, are looking to divest five per cent stake in the life insurance company, according to reports. The life insurance company collected Rs 3,586 crore in new premiums in the April-December 2014 period, according to Life Insurance Council data, which is a 40 per cent growth over the year-ago period. This was on the back of a strong growth in their business from unit-linked plans.
A stake sale of a small quantity is considered the first step to a listing goal by a company. Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services, explained that price discovery through a fund is far more scientific than doing it through the open market. "Analysts at these funds are at a far better position to determine the price and they do their own due diligence on the books," he added.
Analysts believe the sale in insurance ventures might also help free up some additional capital that the banks will need in order to meet the Basel-III requirement norms by March 2019.
According to a Fitch rating report, banks will need $200 billion additional capital over the next five years to meet Basel-III norms for capital adequacy and the demand for funds as growth picks up.
According to data from the Reserve Bank of India (RBI), between March and September 2014, the total capital and risk weighted assets of scheduled commercial banks increased 1.9 per cent and 4.1 per cent, respectively. This has resulted in a decline in the capital adequacy ratio from 13 per cent to 12.8 per cent.
Experts also believe that if ICICI Prudential Life and HDFC Life stake sales and listings receive a good response, then others wil follow suit.
"ICICI Prudential Life and HDFC Life have been very clear on their strategy. And this is something that had been outlined as well. Once this happens, then other players are going to follow suit, hopefully by next year," said an analyst requesting anonymity.
A former committee at the insurance regulator's office had also identified the bank-led players including ICICI Prudential Life, HDFC Life, SBI Life apart from others such as Bajaj Allianz and Reliance Life as the prospective candidates that could go for an IPO in the first stages.
In December 2014, Housing Development Finance Corporation (HDFC) had said Azim Premji Trust would buy 0.95 per cent stake in its life insurance venture, HDFC Life, for Rs 198.9 crore. The deal valued HDFC Life at Rs 19,890 crore.
HDFC has concluded the sale of the first tranche of 11 million shares. After the entire sale of equity shares is completed, the company will hold 71.42 per cent of the total issued and paid-up equity capital of HDFC Life.
According to Insurance Regulatory and Development Authority of India norms, a company has to be in the insurance business for 10 years to be eligible to list on the equity market. The regulator considers the financial performance, capital structure after offer and solvency margin, among other factors, to give its nod.