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Punjab National Bank, the country’s second largest public sector bank, plans to complete its stake sale in associate company Canara HSBC OBC Life Insurance in next one to one-and-a -half years, CH.S.S. Mallikarjuna Rao, Managing Director & CEO of the bank said.
“Because of our amalgamation with OBC from April 1 last year, forbearance was given to us by IRDAI for one year ( till March 31, 2021). Now that the period is over, we have completely assessed the situation and would like to sell our stake. It will not happen overnight ...it could be one year or two years. We would like to submit our plan of action to IRDAI and that is why we have taken the approval from the Board, ” Rao told BusinessLine .
PNB, last weekend, had told the bourses of its intent to divest stake in Canara HSBC OBC Life at an “appropriate time” and “depending on market conditions and available options”.
Complete or partial exit
Asked if this announcement meant that PNB was only looking to exit the venture and not bring its shareholding below 10 per cent, Rao said the bank will have to look into the valuation price matrix first and take a call in the next two years.
“We have taken an approval to have an opportunity to relook at it based on financials. It is very difficult today to decide what will be the best route for a transaction that may happen after a year,” Rao added.
As per the guidelines of IRDAI, PNB has to maintain its stake below 10 per cent in one insurance company. PNB can have a stake in both companies provided its stake in one of the companies is below 10 per cent. Rao said that PNB’s situation with the two insurers— Canara HSBC OBC Life Insurance and PNB MetLife— are quite different.
PNB is not only looking to divest stake in Canara HSBC OBC Life from the perspective of unlocking value for the sake of shedding non-core asset; it is also looking at it as the bank cannot continue permanently in an arrangement where it holds more than 10 per cent in two insurers.
“The question is can you retain upto 10 per cent while unlocking value. Regulator says you can retain upto 10 per cent. But it is a business call to be taken by the bank in days to come,” Rao said.
Right of First Refusal
Rao said that the bank will strictly go by the current shareholder agreement between the three partners. “If it provides for Right of First Refusal, then we will follow it,” he said.
Currently, Canara Bank has 51 per cent stake in Canara HSBC OBC Life Insurance, while HSBC Insurance (Asia Pacific) Holdings has 26 per cent and PNB holds 23 per cent stake in the insurer.
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