ICICI Bank sells 3.96% stake in ICICI Lombard for Rs 2,250 crore

Post the transaction, the ICICI Bank's stake in its general insurance subsidiary stands at 51.9 per cent and the rest is publicly held

ICICI Bank on Friday sold 3.96 per cent stake in ICICI Lombard for Rs 2,250 crore. This was done to strengthen the balance sheet in view of the pandemic, which is expected to worsen the bad loan problem.

In a statement to the exchanges, the bank said that pursuant to the board’s approval, it has divested 18 million shares of face value Rs 10 each of ICICI Lombard General Insurance, representing 3.96 per cent of its equity share capital, for an approximate Rs 2,250 crore.

ICICI Bank’s stake in the subsidiary now stands at 51.9 per cent, with the rest being publicly held.

The ICICI Bank stock closed at Rs 363.90, up 3.38 per cent higher from its previous close on the BSE. ICICI Lombard closed 0.8 per cent lower at Rs 1,266.45 on the BSE.

 

 

The private lender had capital adequacy of 16.11 per cent in March, well above regulatory requirements.

Factoring in bad loans and Covid-led disruptions, the bank made provisions of Rs 5,967 crore — up 9 per cent from the Rs 5,451 crore in Q4FY19.

Analysts said that many banks have been monetising part of their stake in subsidiaries and some strategic holding, so as to enhance capacity to absorb shocks from the economic disruption.

Banks will face heightened stress due to bad loans. On the base case scenario, rating agency ICRA sees gross NPAs rising to 11.3-11.6 per cent by March 2021.

Indian banks face elevated provision pressure (amount set aside for stressed loans) resulting from the corporate stress cycle over FY16-20. They’ve made substantial provisions and are moving to a moderated credit cost cycle.