State-owned LIC, promoter of IDBI Bank, said it plans to retain a portion of its investment in the lender to avail the benefits of the bancassurance.
Along with the government, Life Insurance Corporation (LIC) will also divest its stake in IDBI Bank but may not exit completely, LIC chairman Siddhartha Mohanty told PTI in an interview.
“We have made it clear that IDBI Bank is our first partner in bancassurance. We will retain some stake in IDBI Bank so that the bancassurance partnership continues,” he said.
The government, which owns more than 45 percent stake in IDBI Bank, and life insurer LIC, with a 49.24 percent stake in the lender, have jointly decided to sell a 60.7 percent stake.
IDBI Bank became a subsidiary of LIC with effect from January 21, 2019, after the acquisition of an additional 82,75,90,885 equity shares.
On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of LIC shareholding to 49.24 percent, following the issuance of additional equity shares of the bank under a qualified institutional placement (QIP).
IDBI Bank was the strongest contributor to the bancassurance channel, he said, adding that as the bancassurance arrangement will continue, LIC may not have to hold the entire stake.
Bancassurance is an arrangement between a bank and an insurance company, allowing the latter to sell its products to the bank’s customers and others through the branch network.
Earlier this month, Department of Investment and Public Asset Monetization (DIPAM) Secretary Tuhin Kanta Pandey said the stake sale in IDBI Bank may not be completed before March 2024.
The transaction is “on course”, but there are aspects like the RBI’s fit and proper criteria that need to be met, Pandey said, adding, “We almost don’t think that by March, we can conclude it (IDBI Bank). investment sale)”.
On the concerns of shareholders about the low price of LIC shares post-listing, Mohanty said, “We are very concerned about the interest of our shareholders and are taking steps to create margin by adopting various measures, including changing product mix”.
After listing, there has been a directional change in LIC’s approach regarding product mix, channel mix and digital intervention, he noted.
Sharing movement is a function of many things, he said, adding that “as management, we are committed to creating shareholder value, and in that direction, we are working”.
To instill confidence in foreign investors, LIC conducted a non-deal roadshow in the US, UK, Singapore and Hong Kong earlier this year.
The non-deal road show received a good response, and most investors showed a lot of interest in LIC, Mohanty said.
He expressed hope that FIIs will also be interested as they observe quarterly performance. Once they are convinced, money will flow.
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This story was published by a wire agency feed without modifications to the text.
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Updated: 27 Nov 2023, 18:05 IST