Bharti Axa, Kotak Life, Jhunjhunwala’s RARE in race for IDBI Federal Life

New Delhi | Mumbai: Bharti Axa Life Insurance, Kotak Life Insurance, Rakesh Jhunjhunwala’s RARE Enterprises and Kedaara Capital have bid for a controlling stake in IDBI Federal Life Insurance, which has been put on the block again this year, people aware of the developments said.

The proposals were submitted on November 4, the deadline for bids, the people said. The offers are being vetted and negotiations will follow, according to one person aware of the matter. The company’s valuation has plummeted by more than 50 per cent from the last time it was put up for sale because the buyer will not be allowed to use IDBI Bank’s network of almost 2,000 branches to sell insurance policies.

The three shareholders of the company – state-run IDBI Bank (48 per cent stake), Brussels-based insurer Ageas (26 per cent) and Federal Bank (26 per cent) – had quoted a valuation of Rs 6,000 crore to potential buyers last year before shelving the sale process as the bids did not match expectations.

Life Insurance Corporation of India took over IDBI Bank last year after a government-backed rescue was organised for the troubled lender. The takeover resulted in LIC owning an indirect economic interest in IDBI Federal Life Insurance through its ownership of the bank, something the insurance regulator has disallowed. “A deal is imminent this time as regulations do not permit LIC to own two life insurance companies,” one person said.

IDBI Bank has been exclusively distributing LIC’s policies ever since the shareholding changed and the staterun life insurer is not inclined to allow the bank to sell insurance products of a third party, people said. “Sales will fall off a cliff once the IDBI bancassurance partnership is gone. The company’s existing financial profile will change dramatically,” said a suitor who had evaluated the business last time but stayed away from bidding this time, speaking on condition of anonymity.

“Ageas is keen to stay in India and will not sell its stake in the company as it is looking to expand in India,” according to one person. However, another person claimed Ageas’ stake was also on the block to make the deal attractive. Ageas recently bought a 49 per cent stake in Royal Sundaram General Insurance.

IDBI Bank announced its intention to divest its stake through a newspaper advertisement inviting proposals last month. “Bharti Axa is very keen to strengthen the bancasurance channel since it is a key distribution and growth opportunity. We believe partnerships with banks will help achieve our longterm growth aspirations and also increase the insurance penetration in the country,” a Bharti Axa spokesperson said in response to ET’s queries. “However, as a matter of policy, we do not comment on market speculation.” Emailed queries to Kotak Life Insurance, RARE Enterprises and Kedaara Capital went unanswered.

Though the deal will not include IDBI’s Bank’s network, bidders have been offered Federal Bank’s network to distribute policies. Federal Bank will remain invested in the insurance company. IDBI Federal Life Insurance has reported an embedded value of Rs 1,900 crore. The insurer reported a net profit of Rs 133 crore for 2018-19 and an 8 per cent increase in total premium to Rs 1,900 crore. IDBI Bank contributed 50 per cent of its sales of insurance policies, followed by Federal Bank at 25 per cent and the remaining by the agency channel. The company declared a dividend for the first time last year of 10 per cent after having wiped out all accumulated losses.

Source: The Economic Times