GIC picks up stake in ICICI Prudential Life Insurance in new BFSI bet
Photo Credit: VCCircle

ICICI Bank, India’s second-largest private-sector lender, on Monday divested a small chunk of its holding in its life insurance arm to shore up its capital base and strengthen its balance sheet.


The bank informed stock exchanges it sold 21.5 million shares of ICICI Prudential Life Insurance Co. Ltd, representing a 1.5% stake, for about Rs 841 crore (nearly $111 million at current exchange rates).

Singapore sovereign wealth fund GIC Pte. Ltd bought most of the shares, stock-exchange data showed.

GIC bought about 16.43 million shares, representing a 1.14% stake, worth Rs 643.5 crore before accounting for transaction costs and statutory levies.

GIC joins fellow Singapore state investment firm Temasek as an investor in ICICI Prudential. Temasek had picked up a 2% stake in the insurer in November 2015.

GIC also has a 1.5% stake in another Indian insurer, SBI Life Insurance Co. Ltd. The wealth fund has over the past few months shuffled its investments in Indian banking, financial services and insurance companies, VCCircle reported last month.

Meanwhile, ICICI Bank’s holding in the insurer will dilute to 51.37% from 52.87% at the end of March. The bank’s joint venture partner, Prudential Corp. Holdings, owns a 22.11% stake in the insurer.

The stake sale comes days after ICICI Bank last week sold a small chunk in non-life insurance subsidiary ICICI Lombard General Insurance Co. Ltd for Rs 2,250 crore ($295 million).

The bank anticipates an impact on its business as well as the Indian economy due to a nationwide lockdown to safeguard against the coronavirus pandemic.

At its board meeting on May 9, when ICICI Bank announced its quarterly results, it said: “The bank's business is expected to be impacted by lower lending opportunities and revenues in the short to medium term. The impact of the Covid-19 pandemic on bank's results, including credit quality and provisions, remains uncertain.”

At the end of March 2020, ICICI Bank’s total capital adequacy ratio was 16.11% and Tier-1 capital adequacy was 14.72%. This is higher than the minimum regulatory requirements of 11.08% and 9.08%, respectively, as per the Reserve Bank of India’s guidelines on Basel III norms.

“The bank is well-capitalised and has a strong deposit franchise… The bank is using this period to further strengthen its platforms, its ability to capture market potential and its delivery capabilities, while enhancing efficiency,” the bank said while announcing its earnings for the quarter through March.

This is the third time that ICICI Bank has sold a stake in ICICI Prudential since the insurer went public in September 2016. ICICI Bank had sold a 12.63% stake nearly four years ago and fetched about Rs about Rs 6,050 crore ($910 million then). It divested a 2% stake in the April-June 2018 quarter and raised about Rs 1,110 crore.

ICICI Prudential is one of India’s top three private-sector life insurance companies. SBI Life Insurance Co., a joint venture of State Bank of India and BNP Paribas, and HDFC Standard Life Insurance Company Ltd, a joint venture of Indian mortgage lender Housing Development Finance Corp. and the UK-based Standard Life Plc, are the other top private-sector life insurers.

India’s crowded life insurance industry has 24 companies. The sector is dominated by state-run Life Insurance Corporation.

ICICI Prudential Life began operations in 2001. It had assets under management of about Rs 1.53 trillion as of March 31, 2020. It earned net premium income of Rs 32,879 crore for 2019-20 and a profit after tax of Rs 1,069 crore.

*The headline and text of this article have been updated to add information about the buyer.

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