In order to gain from bancassurance, LIC is eager to retain a portion of its share in IDBI Bank

28 Nov 2023 , 01:55 PM

The promoter of IDBI Bank, LIC, has stated that in order to take advantage of the bancassurance, it intends to hold onto a portion of its equity in the lender. According to LIC Chairman Siddhartha Mohanty, in an interview with PTI, the company will relinquish its share of IDBI Bank along with the government, though it may not do so entirely.

‘We have stated unequivocally that IDBI Bank is our top bancassurance partner. In order to maintain the bancassurance agreement, we will own a portion of the shares in IDBI Bank,’ he declared.

The government, which holds more than 45% of IDBI Bank, and the massive life insurance company LIC, which holds 49.24% of the lender, have opted to sell a combined 60.7% of the bank.

With effect from January 21, 2019, IDBI Bank joined LIC as a subsidiary following the purchase of an extra 82,75,90,885 equity shares.

After the bank issued more equity shares through a qualified institutional placement (QIP), LIC’s stake dropped to 49.24%, and on December 19, 2020, IDBI Bank was reclassified as an associate company.

He added that for the bancassurance arrangement to continue, LIC might not need to keep the entire stake and that IDBI Bank has been the biggest contributor to the channel.

An agreement known as bancassurance permits an insurance provider to market its goods to both bank clients and other people via the bank’s branch network.

Tuhin Kanta Pandey, the secretary of the Department of Investment and Public Asset Monetization (DIPAM), stated earlier this month that the sale of the IDBI Bank holding might not be finished by March 2024.

The transaction is ‘on course,’ but Pandey added, ‘We practically don’t think that before March, we can conclude it (IDBI Bank stake sale)’ because of certain requirements, including as the RBI’s fit and appropriate standards.

‘We are very much concerned about the interest of our shareholders and are taking steps to create margin by adopting various means, including by changing product mix,’ Mohanty said in response to questions from investors over the low price of LIC shares following their listing.

He pointed out that following the listing, LIC’s strategy for product mix, channel mix, and digital intervention changed.

He stated that ‘as management, we are committed to create shareholders value, and in that direction, we are working.’ Share movement is a result of numerous factors.

LIC had earlier this year done a non-deal roadshow in the US, UK, Singapore, and Hong Kong to reassure overseas investors.

According to Mohanty, the non-transaction roadshow was well received, and the majority of investors showed a great degree of interest in LIC.

He expressed optimism that since FIIs are keeping an eye on quarterly performance, they will also show interest. Money will come in once they are persuaded.

For feedback and suggestions, write to us at [e-mail]