IAG may Raise Stake in SBI Insurance Co
Mumbai: Insurance Australia Group (IAG) is likely to raise its stake in SBI General Insurance Company to 49%, which could fetch SBI more than ₹ 1,000 crore. The stake sale could help the State Bank of India (SBI) improve its capital cushion as the governmentholdsontoitspursestringsincapitalisingbanks.
“IAG has exercised its dial-up option,” said a senior SBI General Insurance official. “Now, much of it will depend on whether they will take a commercial call.” ‘Dial-up option’ refers to the right to exercise a call within the time frame stipulated in its JV MoU, which IAG has done now.
SBIhasstartedtheprocessandwillsoonappointavaluer to decide on the price of the shares in the general insurancecompany.In2009,SBI hadenteredintoajointventure agreement with IAG for its general insurance business. IAG currently owns 26% of SBI General Insurance, with SBI holding 74%.
At the time of entering the joint venture, IAG had paid ₹ 542 crore for a 26% stake in the general insurance company to partner with the country’s largest lender. Of this, ₹ 500 crore was the premium for the JV. SBI had made initial investment of over ₹ 100 crore as capital.
Given that the company has set up a huge distribution networkandhasbeeninoperationforeightyears,analysts expect the joint venture to fetch more than the last time. “The share sale can fetch SBI around ₹ 1,000 crore from the general insurance venture,” said a partner with a consultancyfirm.SBIGeneralhaspresencein17,274branchesof SBI and 10 Regional Rural Banks. The company has a robust multi-distribution model which includes bancassurance,agency,broking&retaildirectchannels.“WhenIAG came in, the joint venture did not have a proven track record.Today,ithascreateditsdistributionnetworkandhas been in business for years. The valuation will definitely be higher than last time,” the official said.