A day after the Union cabinet approved infusing ₹9,300 crore into IDBI Bank, the lender announced plans to sell its stake in its insurance joint venture IDBI Federal Life Insurance Co.
JP Morgan India has been mandated to manage the process, the bank said in a newspaper advertisement.
“JP Morgan India Pvt. Ltd has been mandated for advising and managing a strategic review process for IDBI Federal Life Insurance Co. Ltd which may result in, inter alia, potential divestment of all or part of the stake held by IDBI Bank in IDBI Federal Life Insurance Company,” IDBI Bank said. JP Morgan will invite expressions of interest by way of submission of comprehensive, non-binding proposal from potential investors for evaluating the potential transaction, it said.
While IDBI Bank owns 48% of the insurance company, Federal Bank and Ageas Insurance International NV own 26% each. IDBI Bank’s exit from the insurance joint venture became necessary after state-owned Life Insurance Corp. of India (LIC) took a 51% stake in it in January and the bank started using its network to sell LIC products. Through the sale of a non-core asset, the LIC-controlled lender is trying to raise additional capital. IDBI Bank is also looking to sell its mutual fund business. Mint reported on 30 May that the bank’s mutual fund business has assets under management of more than ₹9,000 crore. The final valuation of the business will depend primarily on the mix of assets in equity, debt and liquid funds.
IDBI Bank has been looking for an investor in the insurance company since 2017. According to a Mint report on 26 July, 2017, all three stakeholders were then looking to exit the business and had initiated the process of hiring investment banks to manage the sale. The company was valued upwards of ₹3,000 crore, according to the same report.
In January, IDBI Bank said its board has approved a proposal to resume the process of selling its stake in the life insurance joint venture.
“We hereby advise that the board of directors of IDBI Bank at its meeting held on Monday, 21 January, 2019 has approved in-principle, the proposal to re-initiate divestment process of IDBI stake in IDBI Federal Life Insurance Co. Ltd subject to statutory/regulatory approvals, if any, required to be obtained in this regard,” the bank had said in a regulatory filing.
IDBI Federal operates through a nationwide network of more than 3,100 branches of IDBI Bank and Federal Bank, besides distribution partners. As on 31 March, it had issued more than one million policies with a sum assured of over ₹87,700 crore.
Source: Mint