India's largest public sector bank State Bank of India (SBI) has sold a 4 per cent stake in SBI General Insurance to Axis Asset Management Company (AMC) and Premji Invest for Rs 482 crore. It is part of a pre-offer valuation exercise by SBI General Insurance. This comes ahead of its initial public offering (IPO) in March 2019.
SBI General Insurance is a joint venture between the SBI and Insurance Australia Group (IAG) which commenced its operations in 2010 and provides a wide range of insurance products in the retail and commercial space.
After the sale, IAG continues to hold a 26 per cent stake while SBI's stake in the venture has come down to 70 per cent, according to a report by the Business Standard.The transaction placed a value of Rs 12,000 cr on SBI General Insurance.
According to the Business Standard report, SBI Chairman Rajnish Kumar said, "All our subsidiaries have done exceedingly well. They hold large value waiting to be unlocked. We have plans to unlock that potential in the current as well as in the next year. The insurance segment is still young and nascent in India, it is a highly under-penetrated market, we foresee a significant scope of growth for SBI GI to achieve size, scale and profitability."
State Bank also plans to sell a stake in SBI Card and SBI Capital Market, Kumar said. Initially announced by SBI in August, the stake sale had attracted interest from three global private equity investors including KKR, Singapore's Temasek Holdings and Canada Pension Plan Investment Board (CPPIB).
Pushan Mahapatra, Managing Director and Chief Executive Officer at SBI General Insurance said, "The company is just 7 years into operations and has already achieved a sizeable scale, making it the 7th largest private general insurance player as of June 2018.The company is present in every district of the country through its own branches, branches of SBI and RRBs with access to 29,500-plus branches. Further, we have a wide and comprehensive product bouquet meeting needs of customers in every segment."
But some distance is left to be covered as SBI will have to get approval from the Insurance Regulatory and Development Authority of India (IRDAI) to complete the stake sale process.Kotak Mahindra Capital were the financial advisors for the transaction, while J Sagar Associates were the legal advisors.
The quarter ended 30 June 2018, SBI General posted a 126 per cent year-on-year growth in net profit at Rs 113 crore.