The board of ICICI Bank on Monday approved the sale of part of its stake in the joint venture, ICICI Lombard General Insurance, through an initial public offering (IPO). Though the exact valuation and size of the deal was not disclosed, ICICI Lombard had been valued at Rs 20,300 crore according to a recent deal.
ICICI Lombard General Insurance, the leader in the private general insurance space, is a joint venture between ICICI Bank and Fairfax Financial Holding. With this, ICICI Lombard is all set to become the first private sector general insurer in the country to go public.
On Monday, ICICI Lombard said in a press release: “ICICI Bank Limited and Fairfax Financial Holdings Limited, through its affiliate FAL Corporation, have informed ICICI Lombard General Insurance Company Limited (“the Company”) that they intend to partially divest equity shares of the Company, held by each of them, through an initial public offering of the equity shares of the Company by way of an offer for sale.”
On May 27, ICICI Lombard had announced that Fairfax Financial Holding had sold 12.18% of its stake in the company to private equity firms Warburg Pincus, Clermont Group and IIFL Special Opportunities Fund. The stake sale valued the company at Rs 20,300 crore, which would mean that Fairfax fetched Rs 2,472.54 crore from the sale. Upon completion of the transaction, the ownership of ICICI Bank and Fairfax in the company will approximately be 63.31% and 22.13%, respectively.
“Accordingly, the board of directors of the company at its meeting held today has approved the offer, subject to market conditions and necessary approvals. The size and other details of the offer would be determined in due course,” the press release issued by ICICI Lombard said.
A few months ago, Fairfax Holding, along with Oben General Insurance, had received initial approval, known as R1, from the Insurance Regulatory and Development Authority of India (Irdai) to start their non-life venture.
Senior officials in the insurance industry said Insurance Act allows foreign promoters to hold up to 49% of stake in Indian insurance companies. But Fairfax owns 22.13% (if the 12.81% stake sale gets cleared) in ICICI Lombard, and as an investor one can own up to 10% in any insurance company. So, we might see Fairfax reducing the stake by another over 12% in the IPO and take it below 10%.
In 2016-17, ICICI Lombard reported a 32.56% year-on-year growth in its gross direct premium at Rs 10,725.19 crore. In the previous financial year, ICICI Lombard had a market share of 8.43%, the highest among private insurers.
The company posted a profit after tax (PAT) of `701.9 crore in FY17, compared with Rs 507.5 crore in FY16. Return on equity (RoE) increased to 20.3% in FY17 as against 16.9% in the previous fiscal. Its solvency ratio was at 2.10 times, against the minimum regulatory requirement of 1.5 times.