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Federal Bank to buy an additional 4% stake in life insurance JV from IDBI Bank for over Rs 80 crore

South-based lender Federal Bank will be paying over Rs 80 crore to buy additional four per cent stake in its life insurance joint venture IDBI Federal Life Insurance, a top official has said.

The stake buy from the state-run IDBI Bank will take Federal Bank’s stake in the 12-year-old company to 30 per cent, the maximum permissible level for a lender under the regulations, its managing director and chief executive Shyam Srinivasan told PTI.

Without giving targeted timelines, he said IDBI Bank, which holds 48 per cent stake in the venture, will be selling 27 per cent stake in the venture to get its holding down to 21 per cent.

Federal Bank will be purchasing 4 per cent, while their Dutch partner Ageas Insurance International NV will be buying 23 per cent to take its ownership to 49 per cent, the maximum permissible for a foreign partner in a life insurance venture.

“The valuations have been decided between partners by appointing third parties. IDBI Bank will reduce either to 25 or 21 per cent depending on whether we buy or not,” he said and added that “we will take our stake to the maximum permissible 30 per cent and it will take about Rs 80-90 crore for the 4 per cent stake.”

At the lower-end of the valuation hinted by Srinivasan, the total valuation of the insurer will come at about Rs 2,000 crore. Srinivasan said it is a good investment for the bank which can reap in benefits later but declined to answer whether they are looking at an eventual listing of the venture.

The company has a good presence in the market and such a deal will be beneficial for all the stakeholders, he said.

It can be noted that the transactions have been triggered primarily by life insurance behemoth LIC buying a majority stake in IDBI Bank last year, due to which the lender is reducing its 48 per cent stake in the venture.

Srinivasan said the bank is presently in a capital conservation mode wherein it is looking at ways of conserving money, but stressed that increasing the stake is a good bet from a future perspective and also added that the amount to be invested at over Rs 80 crore is “considerably low”.

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Bank of Baroda share price surges over 50% in a month, jumps 9% today on Q4 profit

Bank of Baroda share price zoomed 9 per cent to Rs 55 apiece on BSE a day after the bank reported a net profit of Rs 506.6 crore in the January-March quarter of the financial year 2019-20. The bank had posted a loss of Rs 991 crore in the corresponding quarter of the previous year. Bank of Baroda stock price has rallied over 52 per cent from its May low. “The results for the quarter and year ending March 31 and quarter ended December 31, 2019, includes operations of erstwhile Vijaya Bank and erstwhile Dena Bank,” BoB said in a regulatory filing.

Around 11 AM, Bank of Baroda shares were trading 4.96 per cent higher at Rs 53 apiece as compared to a 0.14 per cent in S&P BSE Sensex. With today’s gain in the stock price, the market capitalisation of the bank stands at Rs 24,465.90 crore. For the full financial year 2019-20, Bank of Baroda posted a net profit of Rs 546.18 crore, up from Rs 433.52 crore in the preceding fiscal. Research and brokerage firm Motilal Oswal has recommended to buy the stock with a price target of Rs 70, an upside of nearly 40 per cent from yesterday’s close. The brokerage firm said that it would revise its estimates and target price post the analysts’ webinar.

Another research and brokerage firm Kotak Institutional Equities has maintained an ‘add’ rating to the stock with a revised fair value of Rs 65 from Rs 105 earlier. “The bank has made additional standard asset provisions ahead of possible risks arising out of Covid in the current quarter. The merger progress is broadly on track and disruption has been lesser than anticipated,” said Kotak Institutional Equities in its latest research report.

On the asset front, the gross non-performing assets (NPAs) or bad loans of Bank of Baroda came down to 9.40 per cent of the gross advances as on March 31, 2020, as compared to 9.61 per cent on March 31, 2019.

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ICICI Prudential Life Insurance share price jumps 8% after ICICI Bank divests stake; check who bought shares

Share price of ICICI Prudential Life Insurance Company has surged 8% in the last two days after parent company ICICI Bank announced divestment of a 1.5% equity stake in the firm. This has taken the stock price from a price of Rs 391 per share at the end of trading last week to Rs 421 apiece on Tuesday. ICICI Bank has now sold 2.15 crore equity shares of face value of Rs. 10 each, representing 1.50% of its equity share capital at the end of March this year. Interestingly the buyer, according to data available on the stock exchanges, is the Monetary Authority of Singapore at a price of Rs 391.6 per share.

ICICI Bank informed the stock exchanges that the 1.5% equity stake divestment through open markets helped the private sector lender raise Rs 840 crore. This is just days after the bank sold a 3.96% equity stake in ICICI Lombard for over Rs 2,200 crore. ICICI Bank had already informed investors, while announcing its March quarter results, that the bank would be looking to further improve its balance sheet as opportunities arise. With the sale of 2.15 crore equity shares, ICICI Bank’s shareholding in ICICI Prudential is now down to 51.4%.

Brokerage and research firm Motilal Oswal termed ICICI Prudential Life Insurance as a high conviction idea earlier this month. ICICI Prudential, according to Motilal Oswal, is continuing with its guidance of doubling VNB over 3-4 years, on the back of share of non-linked, protection/annuity segment rising, persistency trends stable, and improving productivity by focusing on enhancing distribution and bringing cost down. “We believe the Indian life insurance sector is in a sweet spot, where strong structural potential is now overlapping with the rising share of financial savings and higher disposable income. We, thus, expect Indian insurers to trade at a premium to global insurers,” it said.

While ICICI Prudential’s stock was up, ICICI Bank shares have slipped 2% in the same time frame. In the January-March quarter, ICICI Bank reported a 26% jump in standalone profit to Rs 1,221 crore, on-year basis. The private lender announced that non-performing assets declined to 5.53% from 6.70% in the last one year. Provisions stood at Rs 3,242 crore while coronavirus related provisions were Rs 2,725 crore. The provision coverage ratio on non-performing loans, including cumulative technical write-offs, was 86.8% at March 2020 compared to 80.7% in March 2019.

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Sebi reports 13% income growth at Rs 963 cr in 2018-19

Capital markets regulator Sebi has posted a 13 per cent increase in its total income to over Rs 963 crore in 2018-19, mainly due to rise in earnings from fees and subscription income.

As per the annual accounts of Sebi, the total expenditure of the regulator also rose to Rs 492.34 crore for the year ended March 31, 2019, from Rs 414.46 crore in the previous fiscal.

The other administrative expenses increased from Rs 121 crore to Rs 131 crore, the establishment expenses climbed from Rs 244 crore to Rs 293 crore.

The regulator’s fee income surged to Rs 750 crore from Rs 624 crore and other income rose to 17 crore from nearly Rs 10 crore. Earning from investments, however, dropped to Rs 180 crore from Rs 207 crore.

Overall, the market watchdog’s total income increased to Rs 963.59 crore in 2018-19 from Rs 854.78 crore in the preceding fiscal, indicating a growth of 13 per cent. The fee income included earnings from annual fees or subscription, listing fees contribution from stock exchanges, income from registration, renewal and application.

Formed by the government in 1988, the Securities and Exchange Board of India (Sebi) was given statutory powers after passage of the Sebi Act in 1992 after the Harshad Mehta scam hit the Indian markets.

As per its preamble, Sebi is mandated to protect the interests of investors in securities as well as promote and regulate the securities markets.

It regulates business in stock exchanges and other securities markets, registers and regulates various market intermediaries, including brokers, merchant bankers, registrars, portfolio managers and investment advisers, as well as foreign portfolio investors, credit rating agencies, mutual funds and venture capital funds.

Besides, Sebi is mandated to check fraudulent and unfair trade practices, insider trading and other manipulative activities.

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