ICICI Bank, Fairfax to shed stake in ICICI Lombard via IPO

ICICI Bank holds 63.31% stake while Fairfax India Holdings Corporation holds 22.13% approximately

ICICI Bank and Fairfax Financial Holdings will sell a part of their stakes in ICICI Lombard General Insurance Company in the latter’s initial public offering (IPO) of equity, to monetise their investment.

ICICI Lombard is a joint venture (JV) between the bank and the Canada-based financial holdings company, founded and led by Prem Watsa, a magnate of Indian origin.

The company will sell shares through the IPO, the size of which and other details are to be announced later.

Capital market sources say the insurer has begun preliminary discussion with investment bankers and plans to hit the market in the second half of this financial year. The issue is likely to range between Rs 3,000 and Rs 4,500 crore. 

Last month, Fairfax sold 12.18 per cent of its stake in the insurance JV to a group of investors, including Warburg Pincus, for Rs 2,473 crore.  With that stake sale, the general insurance company was valued at Rs 20,300 crore. 

At the time, the bank had 63.31 per cent of the equity and Fairfax India Holdings 22.13 per cent.

ICICI Lombard has 8.4 per cent in the Indian general insurance segment. It had reported a 38.3 per cent increase in net profit for 2016-17, at Rs 702 crore. Its gross domestic premium income rose by 32.6 per cent to Rs 10,726 crore from the previous year.

Sale of stake in ICICI Lombard is the second instance of ICICI Bank shedding stake in its insurance ventures. In 2015, it sold six per cent stake in ICICI Prudential Life Insurance through an IPO, for Rs 1,950 crore. 

Fairfax wants to enter into a JV with another insurance company. However, rules here specify that a promoter cannot have substantial stakes in two insurance entities. To do so, Fairfax has to reduce its share to 10 per cent in ICICI Lombard and is looking to sell more of its stake.