SBI General Insurance stake sale attracts KKR, Temasek, CPPIB
KKR, Temasek Holdings and CPPIB have expressed initial interest and are expected to submit the binding bids, but more bidders are expected to enter the fray
Mumbai: The proposed 4% stake sale in SBI General Insurance Co. has drawn interest from at least three global private equity investors, including KKR, Singapore’s Temasek Holdings Pvt. Ltd and Canada Pension Plan Investment Board (CPPIB), two people directly aware of the development said, requesting anonymity. “All the above funds have expressed initial interest and are expected to submit the binding bids but more bidders are expected to place bids,” said one of the persons cited above.
The sale process, which was announced by the State Bank of India (SBI) in August, is being managed by Kotak Investment Banking.
Emails sent to SBI, Kotak Investment Banking and CPPIB remained unanswered until press time, while spokespeople for Temasek and KKR declined to comment.
The 4% stake sale is part of the pre-offer valuation exercise of SBI General Insurance before its planned initial public offering (IPO) by the end of March this year.
In a similar pre-IPO round, SBI Life Insurance divested 3.9% stake to KKR and Temasek for close to ₹ 2,000 crore in 2016, valuing the company at ₹ 45,000 crore before its planned IPO that took place in September 2017.
Compared to the SBI Life transaction, the deal size this time is smaller than that of the SBI Life transaction and the auction is expected to attract a wider participation this time from a diverse group of bidders and may also include smaller investors including domestic private equity funds, said the second person mentioned above.
“The information memorandum (IM) of the transaction was given out to prospective bidders last week,” said the first person cited above. “SBI is expecting bids in the range of ₹400 crore to ₹600 crore but the final figure may vary,” the second person said.
Insurance companies that had divested stakes before planned public offerings like SBI Life include ICICI Prudential, HDFC Life and ICICI Lombard General, which had sold a minor stake to discover value before the listing on the exchanges.
SBI General Insurance, which began its operations in 2010, is a 74:26 joint venture between the SBI and Insurance Australia Group (IAG), which paid ₹ 542 crore for a 26% stake in the joint venture.
In December 2016, IAG had exercised an option to raise its stake to 49% in the next two years.
SBI General Insurance has an exclusive bancassurance tie up with SBI for the distribution of general insurance products. Recent corporate filings show that during FY17, SBI General Insurance’s gross direct premium increased 28% to ₹ 2,604 crore from ₹ 2,040 crore during FY 2016. The company recorded a profit of ₹ 153 crore in 2016-17, its sixth full year of operations, as against a loss of ₹ 120 crore in the previous year.
SBI has infused ₹ 895 crore in SBI General Insurance in the past four years, according to a recent credit rating report. An infusion of ₹ 225 crore in FY2017 was complemented by the company generating internal accruals as their operations turned profitable.
As on 30 June 2017, the solvency ratio was reported at 2.30 times, comfortably above the regulatory requirement of 1.50 times. The company has a capital commitment from SBI for FY18.