IOB, Allahabad Bank may exit Universal Sompo General Insurance

Allahabad Bank and Indian Overseas Bank (IOB) are planning to exit Universal Sompo General Insurance Company, a joint venture among the two public sector banks (PSBs), Karnataka Bank, Dabur Investment Corporation and Sompo Japan Nipponkoa Insurance. In addition, Allahabad Bank is also planning to exit ASREC, an asset reconstruction company, where it holds a 27 per cent stake, by the end of this financial year. The bank is planning to exit both the ventures by the fourth quarter of 2018-19.

According to sources, both Allahabad Bank and IOB are mulling to exit the JV at one go, which would require amendment in the shareholder’s agreement, as it states that at any point, the stakes of the two PSBs together cannot fall below 28 per cent.

At present, Allahabad Bank holds 28.52 per cent, while IOB 18.06 per cent in the company. Karnataka Bank recently sold part of its stake to Dabur and Sompo Japan Nipponkoa. After the deal, Karnataka Bank’s stake in the JV is set to reduce to six per cent from 14.26 per cent earlier, (subject to approval from the Insurance Regulatory and Development Authority of India). Sompo Japan's stake is set to increase to 34.61 per cent, from 28.42 per cent earlier. Similarly, Dabur Investment Corporation’s stake will rise to 12.81 per cent, from 10.74 per cent earlier. Also, with Sompo Japan Nipponkoa’s stake in the JV set to be 34.61, the exit might require roping in a new investor.