SBI sells 3.9% stake in life insurance arm to buy-out funds for nearly Rs1,800 cr

10 Dec 2016

State Bank of India has agreed to sell a 3.9-per cent stake in its life insurance arm SBI Life to affiliates of buy-out funds KKR and Temasek for Rs1,794 crore ($266 million), valuing the private insurer at a whopping Rs46,000 crore.

The deal involves the transfer of 39 million shares of SBI Life at Rs460 apiece to the affiliates of KKR and Temasek.

These affiliates will pick up 1.95 per cent each in SBI Life, valuing the insurer at Rs46,000 crore, State Bank said in a statement, adding the deal was subject to regulatory approvals.

With the stake sale, SBI Life has emerged the most valued private life insurer, overtaking ICICI Prudential, while also giving a boost to SBI's stock. The deal was announced after market hours on Friday.

With a market valuation of Rs46,000 crore, SBI Life Insurance Company (SBI Life) is the most valued private life insurance firm in India, pending merger of HDFC Life and Max Life.

''The partnership with KKR and Temasek is a recognition of the efforts of SBI Life's commitment to create a high quality institution which is a leader in the private Indian life insurance space. Moreover, this transaction values SBI Life at Rs46,000 crore, reflecting significant value creation since its inception in 2001,'' Arundhati Bhattacharya, chairman, SBI, said.

SBI said the bank's executive committee of the central board has approved divestment of this stake, to an investment vehicle affiliated with KKR-managed funds and an affiliate of Temasek, the Singapore-based investment fund.

Upon completion of the transaction, SBI will hold 70.1-per cent stake in SBI Life while its joint venture partner, BNP Paribas Cardif, will continue to hold 26 per cent.

However, ICICI Prudential Life had an 11.3-per cent market share against SBI Life's 9.7-per cent as of March 2016, in terms of retail weighted received premium (RWRP), as per a report published by HSBC last month.

Analysts say the higher valuations could be partly due to the fact that SBI Life's premiums have been growing at a faster clip compared to its peers.