Life Insurance Corporation keen on partial IDBI stake
Life Insurance Corporation (LIC) will retain some stake in privatisation-bound IDBI Bank as it wants to leverage IDBI's bancassurance channel, LIC chairman M.R. Kumar said on Monday.
The Centre is reportedly speeding up the process of IDBI Bank's disinvestment by inviting expressions of interest. It is looking to sell a 94.71 per cent stake in the bank, of which LIC holds 49.24 per cent.
LIC filed a draft red herring prospectus with market regulator Sebi more than a fortnight ago in what would be the country’s largest initial public offering (IPO).
Analysts said Kumar’s comments on IDBI Bank could also be part of a plan to improve its valuations ahead of the public float. The pricing would not only depend on LIC’s core business but also its substantial investment in companies.
In its draft red herring prospectus, LIC said over 90 per cent of its policy holders’ equity investments in India are held in stocks that are part of Nifty 200 and BSE 200. Based on the closing price of the IDBI Bank scrip on Monday, the LIC holding in the is valued at almost Rs 24,400 crore.
IDBI Bank became a subsidiary of LIC in January 2019, when the insurer bought a 51 per cent stake. On December 19, 2020, the lender was re-classified as an associate company because of the reduction of LIC shareholding to 49.24 per cent following a qualified institutional placement (QIP).
“We would like to have some stake in IDBI Bank. The whole idea of us picking up stake in the bank was strategic in nature and that has not gone away at all. I, as LIC chairperson, would like to see that the relationship continuing in the future as well,” Kumar said.
He said IDBI Bank is the strongest contributor to LIC's bancassurance channel; retaining the arrangement will help the insurer to grow the channel even after the bank’s privatisation.
Bancassurance is an arrangement between a bank and an insurance company wherein the latter uses the lenders’ network to sell its products.
Kumar said it was too early to say the stake LIC wants to retain in IDBI Bank. A clearer picture will emerge after the department of investment and public asset management (Dipam) begins the disinvestment exercise in the bank.
The LIC chairman said the IPO will happen in March — although markets are witnessing volatility worldwide, caught between Russia-Ukraine tensions and rising oil prices on one hand and central banks tightening liquidity amid soaring inflation, on the other.
The insurance behemoth is also the largest holder of government debt -- owning 19 per cent of G-secs as well as holder of household savings, according to a report by Swiss brokerage UBS.