IDBI Bank has approved selling a 27% stake in its life insurance joint venture with Federal Bank and Belgium’s Ageas Insurance International NV to the two partners for Rs 595 crore ($78.7 million).
The bank will sell a 23% stake in IDBI Federal Life Insurance Company Ltd to Ageas and 4% to Federal Bank, it said in a stock exchange disclosure. The deal values the insurance company around Rs 2,200 crore.
Shares of IDBI Bank jumped by the maximum daily limit of 5% to end at a one-year high of Rs 41.75 on the BSE on Monday. The BSE’s 30-stock benchmark Sensex fell 0.6%.
At present, IDBI Bank holds a 48% stake in IDBI Federal Life Insurance while Kerala-based Federal Bank and Ageas have 26% stake each.
After the sale, IDBI Bank will reduce its holding in the insurer to 21% while Federal Bank’s stake will increase to 30%. Ageas will hike its ownership to 49%, the maximum permissible for a foreign partner in a life insurance venture.
The stake sale is a step towards meeting India’s insurance regulations that don’t allow an insurer to own a stake of more than 10% in another insurance company. IDBI Bank is 51% owned by state-run Life Insurance Corporation, India’s biggest insurer. After LIC took control of IDBI Bank in January 2019, the bank was required to shed its holding in the insurance joint venture.
IDBI Federal Life, which started operations in 2008, reported a net profit of Rs 148 crore for the year ended 2019-20, up from Rs 133 crore the year before. Total premium declined 4.65% to Rs 1,843 crore from Rs 1,933 crore.
IDBI Bank reported a profit for the January-March 2020 quarter, the first in 13 quarters as it struggled with high bad loans.
The bank had earlier planned to monetise its non-core investments as part of its turnaround plan. In November last year, the bank agreed to sell its mutual fund business to Muthoot Finance.
