Shares of ICICI Lombard General Insurance Company (ICICI Lombard) surged at the stock exchanges on Monday after the board of its parent — ICICI — approved a plan to raise its stake in the general insurance arm.
ICICI Bank on Sunday informed the general insurer that its board has given permission to raise its stake by up to 4 per cent “to ensure compliance with the Section 19(2) of the Banking Regulation Act, 1949’’ and make ICICI Lombard its subsidiary, subject to the receipt of necessary regulatory approvals from various authorities.
ICICI Bank plans to acquire at least 2.5 per cent of the 4 per cent stake before September 9, 2024.
At present, banks are allowed to hold either less than 30 per cent or more than 50 per cent in insurance ventures.
In March, the Reserve Bank of India (RBI) had asked ICICI Bank to bring down its holding to less than 30 per cent in ICICI Lombard by September 9, 2024, after a request from the lender.
However, the board has now approved an increase in the shareholding of the general insurance company.
ICICI Bank holds a 48.02 per cent stake in ICICI Lombard at present.
Any increase in stake by a parent or a promoter in a listed company usually receives a positive response in the stock markets as it denotes their confidence in the latter.
It is estimated that at the current market price, the bank will have to shell out more than Rs 2,300 crore to acquire the 4 per cent in ICICI Lombard.
The news drove up ICICI Lombard stock as it rose 8.19 per cent to end at Rs 1,190 on the BSE.
During the day, the stock zoomed 14.25 per cent to hit Rs 1,256.70. On the NSE, it climbed 8.21 per cent to end at Rs 1,190.30.
The company’s market valuation rose Rs 4,427.87 crore to Rs 58,446.72 crore.
In terms of traded volume, 1.93 lakh shares of the firm were traded on the BSE and over 82.45 lakh shares on the NSE during the day.
ICICI Bank also said that its board has approved the reappointment of executive director Sandeep Batra for a further period of two years with effect from December 23, 2023, to December 22, 2025, subject to RBI approval.
The board also cleared the reappointment of independent director Hari Mundra for one year, while it extended the term for independent directors B. Sriram and S. Madhavan by three years each.
Shares of ICICI Bank ended 0.28 per cent lower at Rs 947.85 on the BSE.