Weeks after the passage of insurance legislation, State Bank of India today decided to divest up to 10 per cent stake in its life insurance arm SBI Life, giving the first right of refusal to foreign partner BNP Paribas Cardif of France.
"The executive committee of the central board has today authorised divestment of SBI's stake in SBI Life Insurance by up to 10 per cent," SBI said in a statement.
"We are continuing discussion with Cardif as it has first right of refusal as per the agreement. Stake dilution process would progress only after getting clear signal from the foreign partner," SBI Life Insurance Managing Director and CEO Arijit Basu told PTI.
Also Read
SBI Life Insurance is a 74:26 per cent joint venture between SBI and BNP Paribas Cardif of France. At present, SBI owns 74 per cent of the total capital and BNP Paribas Cardif has the remaining 26 per cent in the joint venture.
"Stake dilution may not take place this year. It is an enabling provision," he said, adding that it may take place in the January-March quarter of next year subject to conditions.
Board is competent enough to enhance stake dilution portion if it thinks so in consultation with the foreign partner, he added.
Asked if SBI Life is planning public offer, Basu said: "Not this year. IPO (initial public offer) would be a process in the long run."
Stake dilution by SBI will help the country's largest bank in monetising its investment and provide growth capital for banking business.
Meanwhile, SBI shares closed at Rs 267 per unit, down at 0.34 per cent on the BSE.
SBI Life Insurance has an authorised capital of Rs 2,000 crore and a paid-up capital of Rs 1,000 crore, according to its website.
Earlier this month, Parliament passed the Insurance Laws (Amendment) Bill, 2015 which seeks to increase foreign investment in private sector companies to 49 per cent from the existing 26 per cent, among other things.
Last week, SBI had announced that Insurance Australia Group would increase its stake in their general insurance joint venture SBI General from 26 per cent to 49 per cent. The 74:26 JV began operations in 2010.
In January, UK's Bupa Insurance said that it would raise stake in its Indian health insurance venture, Max Bupa, to 49 per cent from the current 26 per cent, becoming the first foreign company to announce a hike in shareholding, following amendments to insurance laws.
