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MUMBAI:The sale of IDBI Bank’s stake in IDBI-Federal Life Insurance is being scrapped after LIC’s entry into the bank as a major financial investor queered the pitch for prospective bidders.
People close to the development said that most bidders had already pulled out except for Aditya Birla Capital, and that LIC’s imminent investment in the stressed lender may prompt the process to be officially called off.
“With LIC being a prominent shareholder, no insurance company will come close to buying IDBI Federal Life Insurance,” said a source close to the development.
“LIC coming in is the best thing to have happened to IDBI Federal Life.”
Last Friday, India’s insurance regulator allowed LIC to buy up to 51 per cent in IDBI Bank.
After the transaction, LIC will also become a significant owner of private sector insurer IDBI Federal Life Insurance, where IDBI Bank owns 48 per cent , and the rest is split between Federal Bank and Ageas.
Bidders such as Kotak Life and Birla Sun Life were keen on IDBI-Federal as it could have given them access to IDBI Bank’s extensive branch network.
But now insurers may have second thoughts due to the presence of LIC, a key rival and the country’s largest life insurer.
JP Morgan was running the mandate and a dozen companies had submitted bids.
One of the shortlisted bidders, Max Life was also willing to pay ₹6,000 crore for IDBI-Federal.
Max Life pulled out as the bank was unwilling to commit to an exclusive bancassurance partnership.
Birla had also put the same conditions.
The insurer sells policies through 3,000 branches of the two lenders, IDBI Bank and Federal Bank.
LIC has stakes in 22 public sector banks.
While rules allow banks to tie up with up to three life insurance companies, many bidders could baulk at selling their policies through a bank owned by their chief rival.
