SBI to dilute 2.1% stake in SBI Life Insurance via offer for sale

The country’s largest lender State Bank of India (SBI) will pare 2.1 per cent of its stake in the subsidiary SBI Life Insurance via an offer for sale. The offer for sale will open on June 12 with a floor price of Rs 725 apiece, which is at 2.1 per cent discount from the last close. SBI is expected to mop up almost $202 million via the share sale.
 

In a statement to the exchanges, SBI said, its board has given a nod to divest 2.1 per cent stake in SBI Life to achieve minimum public shareholding of 25 per cent (remaining part of the bank’s share for minimum public shareholding), through offer for sale.
 

SBI Life is a joint venture between SBI and BNP Paribas Cardiff. At the end of March, 2020, SBI held a 57.60 per cent stake in the life insurer and BNP Paribas Cardiff 5.20 per cent, thereby taking the promoter stake to 62.80 per cent. Public shareholding in SBI Life as of March, 2020, is 37.20 per cent.

 

According to Securities and Exchange Board of India (Sebi) listing norms, promoters have three years from the date of listing to bring down holding to 75 per cent. If the stake goes past 75 per cent because of acquisitions such as open offer or delisting, promoters get one more year to bring down the stakes. According to Sebi norms, SBI Life’s promoter shareholding is well below the minimum threshold.
 

Last year in June, BNP Paribas Cardiff trimmed its shareholding in the life insurer by selling 2.5 per cent stake. It had sold more than 16.5 per cent stake in the insurer in 2019 for more than Rs 9,200 crore. Shares of SBI Life closed 0.2 per cent lower on BSE at Rs 741.45.

 

SBI Life Insurance (SBI Life) reported an 8 per cent growth in pre-tax profit for the March 2020 quarter to Rs 522 crore, compared to Rs 482 crore in the same period of the last financial year. Net profit jumped 16 per cent to Rs 531 crore from Rs 458 crore, on account of lower tax provision.
 

Annualised premium equivalent or APE (a common sales measure for life insurers) declined by about 13 per cent year-on-year (YoY) to Rs 2,690 crore (11 per cent up to Rs 10,740 crore for FY20). However, strong growth in high-margin protection products (up 27 per cent in FY20 and 10 per cent in Q4), sustained improvement in cost ratio, and good persistency (customers’ stickiness) protected the insurer’s operating profitability in Q4.