IDBI Bank may retain up to 25pc stake in IDBI Federal Bank Insurance

Federal Bank holds 26 pc stake in jt venture insurance firm

KOCHI: IDBI Bank is likely to retain 21-25 per cent stake in IDBI Federal Life Insurance Company Ltd (IFLI), where it is currently the largest shareholder with 48 per cent interest.

The remaining 52 per cent interest in the life insurance company is equally owned between the Kochi-headquartered Federal Bank and Ageas Insurance, each holding 26 per cent.

The Wednesday’s (April 8) board meeting of IDBI Bank gave the in-principle approval to this end.

The board of directors of the bank “approved in principle the proposal to sell IDBI Bank’s stake in IDBI Federal Life Insurance Company Ltd (IFLI) to the extent of 23-27 per cent.”

In another developent, the IDBI Bank board has approved the Rupee Bond Borrowing limit of Rs7500 crore for FY 2020-21 to be borrowed in one or more tranches comprising Additional Tier I bonds up to Rs3000 crore, Basel III Tier 2 bonds up to Rs3500 crore and Senior/Infrastructure bonds up to Rs1000 crore by way of private placement during FY 2020-21.

There were reports that Rakesh Jhunjhunwala’s RARE Equity, HDFC Life Insurance and ICICI Prudential Life Insurance had been shortlisted from amongst a list of suitors who have submitted proposals to acquire a significant stake in IFLI

The idea to dilute stake in IFLI, where IDBI Bank is the largest shareholder, has been necessitated by the entry of Life Insurance Corporation (LIC) of India as the 51 per cent shareholder in the bank in a well-thought out move to save the bank while it was grappling with the fast-growing bad loan menace.

LIC bought the majority stake in IFLI in January and the bank started using its network to sell LIC products as was obviously expected as fallout of the deal.

Through the sale of a non-core asset, the LIC-controlled lender was also trying to raise additional capital for the ailing bank.

The fact that LIC holds controlling stake in IDBI Bank disallows the bank to own more than 10 per cent in another insurer and this has prompted the bank to search for a buyer for its stake in the company.

In fact, JP Morgan India was already mandated a few months ago to draw the strategy for IDBI Bank that may involve selling full or a part of the stake in the joint venture insurance company.

There were reports that IDBI Bank has been looking for an investor in the insurance company since 2017 itself. “All three stakeholders were then looking to exit the business and had initiated the process of hiring investment banks to manage the sale,” the reports had said then

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