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Insurance
25-Jun-20
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Federal Bank to buy additional 4% stake in IDBI Federal Life insurance for Rs 80 crore
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South-based lender Federal Bank will be paying over Rs 80 crore to buy additional 4% stake in its life insurance joint venture IDBI Federal Life Insurance, a top official has said.
The stake buy from the state-run IDBI Bank will take Federal Bank's stake in the 12-year-old company to 30%, the maximum permissible level for a lender under the regulations, its managing director and chief executive Shyam Srinivasan told PTI.
Without giving targeted timelines, he said IDBI Bank, which holds 48% stake in the venture, will be selling 27% stake in the venture to get its holding down to 21%.
Federal Bank will be purchasing 4%, while their Dutch partner Ageas Insurance International NV will be buying 23% to take its ownership to 49%, the maximum permissible for a foreign partner in a life insurance venture.
"The valuations have been decided between partners by appointing third parties. IDBI Bank will reduce either to 25 or 21% depending on whether we buy or not," he said and added that "we will take our stake to the maximum permissible 30% and it will take about Rs 80-90 crore for the 4% stake."
At the lower-end of the valuation hinted by Srinivasan, the total valuation of the insurer will come at about Rs 2,000 crore.
Srinivasan said it is a good investment for the bank which can reap in benefits later but declined to answer whether they are looking at an eventual listing of the venture.
The company has a good presence in the market and such a deal will be beneficial for all the stakeholders, he said.
It can be noted that the transactions have been triggered primarily by life insurance behemoth LIC buying a majority stake in IDBI Bank last year, due to which the lender is reducing its 48% stake in the venture.
Srinivasan said the bank is presently in a capital conservation mode wherein it is looking at ways of conserving money, but stressed that increasing the stake is a good bet from a future perspective and also added that the amount to be invested at over Rs 80 crore is "considerably low".
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