SBI to divest 80 million shares in SBI Life via IPO

Price to be fixed after talks with SBI Life, BNP Paribas Cardiff and lead managers

State Bank of India’s (SBI’s) executive committee of the central board has given the final approval for divestment of 80 million shares in SBI Life through an initial public offering (IPO), at a meeting on Monday.  

The shares being offered for sale by the country’s biggest lender will be available at a price that would be fixed and determined by SBI Life, SBI, and BNP Paribas Cardiff, in consultation with the book-running lead managers, the lender said in a statement to the BSE.

Last week, SBI Life had submitted its draft papers to the Insurance Regulatory and Development Authority of India (Irdai) for listing, which has been approved in principle by the regulator. It is still awaiting final approval from the Securities and Exchange Board of India, the Reserve Bank of India and the Government of India.

SBI Life will become the country’s second private insurer to go for an IPO after ICICI Prudential Life Insurance, which was valued at Rs 48,000 crore and sold shares worth Rs 6,057 crore in its public offer. ICICI Prudential Life Insurance is currently valued at Rs 69,450 crore and its share price closed at Rs 483.85 on the BSE on Monday.

SBI Life is expected to raise an estimated Rs 7,000 crore from the stake sale via an IPO.

Experts peg the value of SBI Life, the country's second largest private insurer by market share, around Rs 65,000-70,000 crore. In December 2016, its valuation was Rs 46,000 crore when KKR and Temasek purchased at 1.95 per cent stake each at Rs 460 per share.

SBI Life is a joint venture between SBI and BNP Paribas Cardiff. SBI holds 70.1 per cent of the shares, whereas BNP Paribas has a holding of 26 per cent with KKR (a private equity firm) and Temasek, a Singapore government-owned investment company, holding the rest.

For FY17, SBI Life witnessed a 43 per cent year-on-year (y-o-y) growth in new business premium at Rs 10,144 crore, while gross written premium was up 33 per cent y-o-y at Rs 21,015 crore. Assets held on March 31, 2017, at Rs 97,737 crore, were up by 22 per cent over the previous year. Profit after tax stood at Rs 955 crore in FY17 versus Rs 861 crore in the year-ago period.

SBI Life’s first-year business premium grew by 46.3 per cent y-o-y in May, according to the Irdai.

The individual annual premium equivalent of SBI Life grew by 88.9 per cent y-o-y for the 12 months ending May. The ticket size of SBI Life grew by 39.6 y-o-y in the same time frame, according to Edelweiss Securities.