SBI offloads 4% stake in general insurance arm for Rs 4.81 billion

The country's lead lender also plans to sell a stake in SBI Card and SBI Capital Market, MD Rajnish Kumar said

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 4.81 billion. The stake sale is part of a pre-offer valuation exercise by SBI General Insurance ahead of its initial public initial public offering (IPO) in March 2019. 

SBI General Insurance is a joint venture between the SBI and Insurance Australia Group (IAG). SBI's stake in the venture has come down to 70 per cent, while IAG continues to hold a 26 per cent stake. 

The transaction placed a value of Rs 120 billion on SBI General Insurance. Axis New Opportunities AIF – I represented Axis AMC will purchase 1.65 per cent from SBI while PI Opportunities Fund – I, and an investment fund of Premji Invest will purchase a 2.35 per cent stake.

On Wednesday, 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."

The country's lead lender also plans to sell a stake in SBI Card and SBI Capital Market, Kumar said. 

The stake sale was initially announced by SBI in August and had gathered 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 says, "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."

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. 

For the quarter ended 30 June 2018, SBI General posted a 126 per cent  year-on-year growth in net profit at Rs 1.13 billion. 

Further, the company recorded its first sustainable underwriting profit of Rs 70 million in June 2018, as compared to an underwriting loss of Rs 460 million during the quarter ended June 2017.