Allahabad Bank, one of the promoters of Universal Sompo General Insurance, has been in talks with Sompo Japan Nipponkoa Insurance for offloading is stake in the joint venture, preferably ahead of its merger with Indian Bank, but disagreement over valuation is delaying the process, two people familiar with the development said.
“The valuation has been done. But the partners did not agree to it so far,” one of the people cited above said. “The matter has also been discussed at a board meeting earlier but it was not placed for adoption,” the person said requesting anonymity.
At present, Allahabad Bank holds 28.52% in the JV while overseas partner Sompo Japan is the largest shareholder with 34.61% interest.
Allahabad Bank and Indian Bank will be merged from April as part of the mega merger exercise announced by the government. “The dialogues are on. There is an effort to offload stakes partly before the merger,” another person said.
SPA Securities valued the insurance company at Rs 4400 crore or Rs 120 per share but it is learnt that Sompo has been pressing on a lower valuation.
The Japanese insurer is otherwise keen to raise its stake up to 49%, the maximum permissible under Indian law.
Both the banks are looking to offload stakes partly at the first leg before contemplating a public issue. Universal Sompo has been making profit since last five years and is now eligible for an initial public issue.
Also, a shareholding agreement has binding clause which says that combined shareholding of Allahabad Bank and Indian Overseas Bank cannot go below 28%.
Private sector Karnataka BankNSE 1.76 % holds 6% in the four-way JV with Dabur Investment Corporation (Partnership Firm) holding 12.81% stake.
The general insurer had earned Rs 207 crore profit in the last fiscal.
