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Rakesh Jhunjhunwala’s RARE Equity, HDFC Life Insurance and ICICI Prudential Life Insurance have been shortlisted from amongst a list of suitors who have submitted proposals to acquire a significant stake in IDBI Federal Life Insurance, reviving a transaction that had been shelved two years ago due to uncertainty over the ownership of the life insurers loss-making parent, IDBI Bank, according to people aware of the matter.
The three shortlisted bidders have bid for up to 74 per cent stake in the life insurance company.
Their proposals value the company between Rs 2,400 crore and Rs 3,000 crore, according to sources.
IDBI Bank owns 48 per cent stake in the three-way joint venture in which its other partners are Belgian insurer Ageas and Federal Bank.
“There are three bids that are being evaluated,” said a person familiar with the deal.
“Federal Bank also has the option to increase its stake in the company.
The inclination of the bank is to continue to stay invested in the life insurance business so an outright sale is not on the radar right now but valuations are being assessed.”
RARE, HDFC Life Insurance and ICICI Prudential Life Insurance had not responded to ET’s queries as of press time Wednesday.
Both Federal Bank and Ageas own 26 per cent stake each in the company and have the right to match the best bid that IDBI receives, said another person familiar with the deal.
IDBI Bank, Federal Bank and Ageas also did not respond to emails seeking comments.
IDBI Bank had appointed investment bank JP Morgan last year to sell its stake in the company.
Ageas has also independently explored selling its stake in the JV over the past year, though it is still unclear if it will exit as part of the ongoing transaction.
“It does not look like Federal will want to invest and increase their stake.
They may be open to swapping their shares in the company with a minority stake in another life insurance company, which will allow them to be invested in the life insurance business,” according to another source.
Existing regulations do not allow a life insurer to own a significant stake in a rival.
Two of the three shortlisted bidders are insurance companies and if either of them were to be declared the successful bidder, they would have to merge with IDBI Federal Life, according to the sources.
“There will be the requirement of filing for CCI approvals and also filing a scheme of arrangement with the courts if a merger deal were to be the final option,” said a person aware of the matter.
Life Insurance Corporation of India (LIC) acquired a 51 per cent stake in IDBI Bank in January last year ending uncertainty over the future of the lender that had been running up losses for several consecutive quarters.
IDBI Bank has been pushing LIC’s insurance policies to its customers ever since the change of ownership took place resulting in a significant drop in sales for IDBI Federal Life Insurance, which was largely reliant on its parent’s bank branches to sell its policies, as per sources.
Though the valuation of the company has been impacted, this has not prevented suitors to explore a deal.
Bharti Axa, Kotak Life and Kedaara Capital were also amongst suitors that had initially expressed interest in the life insurer, ET reported on November 13.
IDBI Bank is said to have revived its plan to sell its stake in its life insurance JV due to regulatory reasons as LIC is not permitted to own a stake in another life insurer.
LIC exercises indirect control over the JV due to its position as the controlling shareholder of IDBI Bank.
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Jhunjhunwala co, others in race for IDBI Federal stake
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