The state-owned Life Insurance Corporation of India (LIC), a major shareholder in IDBI Bank, plans to retain a portion of its stake to maintain its bancassurance partnership with the bank. LIC Chairman Siddhartha Mohanty stated that while LIC and the government will divest a significant portion of their holdings in IDBI Bank, LIC will not completely exit the company.
“We have clearly stated that IDBI Bank is our top bancassurance partner. We will retain some stake in IDBI Bank to ensure the continuation of our bancassurance collaboration,” Mohanty explained.
The government, which holds over 45% of IDBI Bank’s shares, and LIC, with a 49.24% ownership, have jointly decided to sell a combined 60.7% stake. IDBI Bank became a subsidiary of LIC in January 2019 following an additional share acquisition. However, in December 2020, IDBI Bank was reclassified as an associate company due to LIC’s shareholding reduction to 49.24% after a qualified institutional placement (QIP) share issuance.
Mohanty emphasized IDBI Bank’s substantial contribution to the bancassurance channel. He added that LIC may not need to hold the entire stake for the bancassurance arrangement to continue.
Bancassurance is a partnership between a bank and an insurance company that allows the insurance company to sell its products to the bank’s customers and others through the bank’s branch network.
Earlier this month, Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Monetisation (DIPAM), indicated that the IDBI Bank stake sale might not be completed by March 2024.
Pandey explained that while the transaction is progressing smoothly, certain factors, such as compliance with the Reserve Bank of India’s (RBI) fit and proper criteria, need to be addressed. “Practically, we don’t think we can conclude the (IDBI Bank stake sale) before March,” he stated.
Regarding shareholder concerns about LIC’s post-listing share price decline, Mohanty assured that LIC is committed to protecting shareholder interests. He outlined measures being taken to improve margins, including product mix optimization.
He noted that LIC has adopted a new approach to product mix, channel mix, and digital intervention since its listing.
Mohanty acknowledged that share movement is influenced by various factors but emphasized LIC’s management’s commitment to creating shareholder value.
To boost investor confidence, LIC conducted a non-deal roadshow in the US, UK, Singapore, and Hong Kong earlier this year. Mohanty reported a positive response from investors, with many expressing keen interest in LIC. He expressed optimism that FIIs will also participate, noting that they are closely monitoring LIC’s quarterly performance.
In conclusion, LIC intends to maintain a strategic stake in IDBI Bank to preserve its valuable bancassurance partnership. The government and LIC are divesting a significant portion of their holdings, but LIC remains committed to the bank’s growth and shareholder value creation.
