ICICI Bank on Friday said its board has approved the sale of 9% of its equity stake in insurance joint venture ICICI Lombard, to its partner Fairfax Financial Holdings in a deal valued at about Rs 1,550 crore, in yet another example of a foreign partner raising its presence in India’s growing insurance business.
Upon completion of the transaction, ICICI Bank will hold about 64% in ICICI Lombard General Insurance Company Ltd, while Fairfax will have 35%. The deal values the company at Rs 17,225 crore.
ICICI Bank managing director Chanda Kochhar said the bank is satisfied with overall valuation and the partner’s move to up stake reflects its confidence in the company and also on the country. On similar plans for the life insurance arm, ICICI Prudential Life, Kochhar said the bank continues to look at opportunities to monetise its investments.
ICICI Bank, India’s largest private lender, also announced its fiscal second-quarter earnings, where consolidated profit grew 12% year-on-year to Rs 3,419 crore from Rs 3,065 crore a year ago. It, however, added fewer bad loans due to a revival in corporate activity and also because of active efforts by firms to reduce debts.
“There is an overall pick up in corporate activity which is good for the industry,” Kochhar said in a telephonic conference call with reporters after the bank announced the results. Incidentally, there was a 25% rise in retail loans by the bank, which includes the individual category.
“The retail portfolio constituted about 44% of the loan portfolio on September 30, compared to 40% last year,” said Kochhar.
The net interest margin —the difference between the interest income generated by banks and the interest paid to lenders — rose to 3.52% from 3.42% last year.
In insurance, ICICI Lombard maintained its private sector leadership with gross written premium increasing by 22% from Rs 1,638 crore in the second fiscal quarter last year, to Rs 1,999 crore this year. ICICI Lombard’s profits dipped to Rs 143 crore from Rs 158 crore in the same period last year.
“We believe that unlocking of value in subsidiaries will be an added icing on the cake for investors,” said Ravi Shenoy of Motilal Oswal Securities.
Earlier this week, Nippon increased its stake in Reliance Life to the maximum of 49% from 26% in a deal worth Rs 2,500 crore.
ICICI Bank’s scrip ended up 2.1% at Rs 277.15 on the BSE.