Post the stake sale subject to regulatory approvals, State Bank of India (SBI) will continue to hold 70% in the company. While 16.01% will be with Napean Opportunities LLP (an affiliate of Premji Invest) and WP Honey Wheat Investment will hold 9.99%.
Insurance Australia Group (IAG), the joint-venture partner of SBI General Insurance, has entered into a definitive agreement to sell its entire 26% stake in the non-life insurer for approximately Rs 3,078 crore. While Premji Invest will acquire 16.01%, Warburg Pincus Group plans to buy the remaining 9.9% in the general insurance company. With this stake sale, the SBI General Insurance is now valued at nearly Rs 12,000 crore.
SBI General Insurance, which was planning for its initial public offering (IPO) in the current financial year, has postponed its plan for now. “With new investors coming in IPO which was planned for FY20 will be pushed by another 15-18 months,” said a top company official. SBI General Insurance has a market share of 3.24% up to September 2019, showed the Irdai data.
Post the stake sale subject to regulatory approvals, State Bank of India (SBI) will continue to hold 70% in the company. While 16.01% will be with Napean Opportunities LLP (an affiliate of Premji Invest) and WP Honey Wheat Investment will hold 9.99%. Another 2.35% and 1.65% will be with PI Opportunities Fund-1 and Axis New Opportunities AIF – I, respectively. Peter Harmer, managing director and chief executive officer, IAG, said, “IAG has enjoyed a strong and successful relationship with SBI since establishing the SBIG joint venture in 2009. With our sharpened focus on our core territories of Australia and New Zealand, now is the right time for IAG to exit its investment in SBIG.” IAG in its news release stated that total consideration of the deal amounts to over A$640 million based on the current exchange rate (for the valuation we have taken exchange rate of Rs 48.09).
Typically, valuations of general insurers is based on their book value and SBI General Insurance’s book value at the end of last fiscal stood at around Rs 1,824 crore. In the past listing of ICICI Lombard General Insurance and New India Assurance, we have seen investors giving them multiples of five to eight times to the book for their IPO. With the current deal, SBI General Insurance is pegged at 6.5 times of its FY19 book value.
In September last year, SBI had sold 4% of its stake to Axis New Opportunities AIF – I represented and PI Opportunities Fund – I, an AIF of Premji Invest for Rs 482 crore and bringing their stake to 70% from 74% in SBI General Insurance. Pushan Mahapatra, MD & CEO, SBIG, said, “We are glad to welcome Premji Invest and Warburg Pincus and look forward to an enriching association to support SBIG’s continued growth and sustainable profitability. We would like to thank IAG for their efforts in successfully propelling SBIG on its growth path.”
The Irdai data showed that SBI General Insurance has underwritten gross direct premium up to September this year at Rs 3,114.10 crore, against Rs 2,064.38 crore in the previous financial year, a growth of over 50.85%. Public-sector insurer, New India Assurance Company has the highest market share of 14.11%, while in the private sector, Bajaj Allianz General Insurance has a market share of 7.38% as on September, showed the Irdai data.