State-owned Bank of India has sold its 18 per cent in Star Union Dai-Ichi Life Insurance Company (SUD) to Japan's Dai-Ichi Life Insurance at about Rs 540 crore which raises latter's stake in the JV to 44 per cent.
"Upon change in law (hike in FDI limit in insurance), Bank of India has sold its 18 per cent stake in Star Union Dai-lchi Life Insurance Company Ltd (SUD) to Dai-Ichi Life Insurance Company Limited (DILIC)", Bank of India it said in a regulatory filing.
"As a result of deliberation to increase the shareholding, following the deregulation of foreign ownership limit which came into effect in March 2015, the company has reached an agreement on purchasing additional 18 per cent in SUD from BOI (approx. Rs 5.4 billion or approx 8.96 billion Japanese Yen), and increasing its ownership in SUD to 44 per cent," Dai-Ichi Life Insurance Company said in a release on its website.
Hence, the shareholding of DILIC will be 44 per cent, up from 26 per cent upon completion of the transaction after receiving necessary statutory/regulatory approvals, BoI said.
Thus shareholding of Bank of India will come down to 30 per cent, from 48 per cent earlier.
Union Bank, the another public sector lender said it continue to hold 26 per cent in SUD.
SUD was incorporated in 2007 as a joint venture among public sector lenders -- Bank of India, Union Bank of India -- and Japan's Dai-Ichi Life Insurance Company to carry life insurance business in India.
"In terms of the joint venture agreement, Dai-Ichi Life Insurance Company Ltd has an option to purchase 18 per cent additional stake in SUD upon "Change in Law" permitting overseas investors to hold stake higher than 26 per cent", the BoI said in the filing.
The business of the JV has been increasing steadily with support of all the partners of the JV, it added further.
The government last year allowed foreign partners to raise their stake in the Indian joint venture insurance companies to 49 per cent from earlier limit of 26 per cent.
DILIC said after increase in the shareholding the company will further strengthen its involvement in the management by increasing the number of director nomination rights, and by utilising the group's comprehensive expertise in life insurance.
Besides it will endeavor to contribute to the development of the Indian life insurance market and pursue further enhancement of its overseas business on a group basis, it said.
After the additional investment, Dai-Ichi Life controls 44 per cent, Bank of India 30 per cent and Union Bank of India 26 per cent in the joint entity.
Earlier, many foreign insurance companies have upped stake in their Indian joint entities including the recent announcement by the UK's Bupa.
Bank of India stock traded 0.62 per cent up at Rs 97.30 on BSE while Union Bank of India was down 0.04 per cent at Rs 128.10.
