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LIC-controlled IDBI Bank on Thursday said it has sold 23 per cent stake in life insurance venture to foreign partner Ageas for ₹507 crore.
With this transaction, the stake of the Belgian partner in IDBI Federal Life Insurance Co Ltd (IFLI) has risen to 49 per cent, the upper foreign direct investment limit prescribed by the law.
IDBI Bank completed sale transaction of its 23 per cent stake to Ageas Insurance International on December 31, 2020 pursuant to receipt of the requisite regulatory approvals, the bank said in a regulatory filing.
“Pursuant to sale of 23 per cent holding representing 18,40,00,000 shares to Ageas for a consideration of .₹507.10 crore, IDBI Bank''s shareholding in IFLI now stands at 25 per cent from the earlier 48 per cent," it said.
Following this transaction, the joint venture has been rebranded as Ageas Federal Life Insurance Company Ltd, it added.
Besides, the bank intends to sell 4 per cent stake to another partner Federal Bank.
The board at its meeting held on June 26, 2020, had approved selling IDBI Bank''s stake in IFLI to the extent of 23 per cent to Ageas and 4 per cent to Federal Bank at a combined value of about Rs 595 crore, subject to all regulatory approvals.
The ₹595 crore raised through this transaction values the life insurer at around Rs 2,200 crore which is just a slight premium to the company''s book value.
Post Life Insurance Corporation India (LIC) acquiring 51 per cent stake in IDBI Bank, the stake sale had become imperative as insurance laws do not allow an insurer to own a significant stake in a rival insurer.
An insurer is not allowed to hold more than 10 per cent stake in a rival insurer. Since LIC owns 51 per cent stake in IDBI Bank and the later owns 48 per cent stake in IFLI, the bank had to divest its stake in its insurance joint venture.
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