Fairfax to sell more stake in ICICI Lombard

Fairfax Financial Holdings, founded by Canadian billionaire Prem Watsa, is looking to sell more stake in ICICI Lombard General Insurance Company. The second stake sale, which is expected to take place in the fourth quarter of 2017-18, could happen through an offer for sale when ICICI Lombard goes for its initial public offering (IPO), say investment banking sources. 

Last Saturday, Fairfax sold 12.18 per cent in ICICI Lombard to private equity firms Warburg Pincus (nine per cent), Clermont Group (1.59 per cent) and IIFL Special Opportunities Fund (1.59 per cent). After the sale, the share ownership in ICICI Lombard of ICICI Bank and Fairfax will be approximately 63 per cent and 22 per cent, respectively.

Fairfax’s sale of ICICI Lombard shares has been necessitated by Fairfax’s decision to start another joint venture in the general insurance space. In January, it applied for a general insurance licence – Oben General Insurance – with Kamesh Goyal, who quit Munich-based Allianz. 

In May, the joint venture received preliminary approval (R1) from the Insurance Regulatory and Development Authority of India (Irdai). Fairfax will own 49 per cent in the new venture.

However, since a promoter cannot have substantial stake in two insurance companies, the insurance regulator has stipulated that Fairfax needs to bring down its stake in ICICI Lombard to below 10 per cent. This implies that Fairfax needs to bring down its stake by over 12 per cent in the existing ICICI Lombard venture. 

According to the press statement for the 12.18 per cent stake sale, the general insurance company was valued at Rs 20,300 crore, implying that Fairfax received Rs 2,372.5 crore from the sale.