Prudential may pare stake by up to 5.83% in ICICI Prudential Life after IPO

According to the revised terms of their joint venture agreement, ICICI Bank and Prudential have both agreed to shed their stake in the insurer


Currently, ICICI Bank holds 67.52% and Prudential 25.83% as the two promoters of India’s largest private sector life insurer. Photo: Pradeep Gaur/Mint
Currently, ICICI Bank holds 67.52% and Prudential 25.83% as the two promoters of India’s largest private sector life insurer. Photo: Pradeep Gaur/Mint

Mumbai: Prudential Corp. Holdings Ltd is likely to trim its stake in ICICI Prudential Life Insurance Co. Ltd by up to 5.83% after the listing of the insurance firm on Indian bourses.

According to the revised terms of their joint venture agreement, ICICI Bank Ltd and Prudential have both agreed to shed their stake in the insurer to achieve minimum public shareholding norms with a floor of 54% and 20% respectively, said the insurer’s draft red herring prospectus.

Currently, ICICI Bank holds 67.52% and Prudential 25.83% as the two promoters of India’s largest private sector life insurer. The rest is held by others, including billionaire investor Azim Premji’s firm M/s Hasham Traders (4%) and Compassive Investment Pte. Ltd (2%).

If ICICI Bank’s offer for sale of 12.63% stake through an IPO is fully subscribed, its stake in the insurer comes down to 54.89%. That doesn’t offer it much leeway to shed more stake for ICICI Prudential to meet the 25% public shareholding norm. Thus, Prudential will have to be the promoter that sheds its stake.

At a press conference to announce the share sale, Chanda Kochhar—managing director and chief executive officer of ICICI Bank as well as chairman of ICICI Prudential—said ICICI Prudential Life will need to achieve the minimum public holding within three years of listing. ICICI Pru will be the first insurer to get publicly listed.

The insurer is a venture between ICICI Bank Ltd, the country’s largest private sector lender, and the UK’s Prudential Corp. Holdings.

This will likely be one of the few cases of a foreign promoter reducing its stake since the new liberalized regime was introduced in the insurance sector in April 2015. The government allows foreign companies to hold as much as 49% in a domestic life insurance firm as against the earlier 26%. This year, foreign holdings have increased in at least 18 Indian insurers.

The share sale, which will open at a price band of Rs300-334 a share, is expected to fetch ICICI Bank Rs6,057 crore at the upper end of valuations. It values ICICI Prudential at Rs47,957 crore.

“These valuations appear high from the last reported stake sales,” said an analyst with a foreign brokerage on condition of anonymity.

Last November, when ICICI Bank sold nearly 6% stake in ICICI Prudential Life, the shares were offloaded for around Rs1,950 crore, valuing the insurer at Rs32,500 crore, which is much lower than the valuation it is aspiring for in its IPO.

ICICI Prudential Life’s IPO comes close on the heels of a merger announced by HDFC Life Insurance Co. Ltd and Max Life Insurance Co. Ltd. On 8 August, HDFC Life and Max Life signed off on their merger, which—if it goes through—will create India’s largest private-sector insurer with assets of at least Rs1.1 trillion and will also allow the former to get listed. ICICI Prudential’s share sale will open between 19 and 21 September.

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