M R Kumar,chairperson,LIC
Elaborating on bancassurance channel, Kumar said LIC has distribution tie up with 58,000 branches of different banks. There is still a lot of scope and headroom for growth on that front, he said adding that the corporation will also be keen on developing exclusive bancassurance products in future
Mumbai:
State-run Life Insurance Corporation (LIC), which is planning the country’s largest IPO next month, may not sell its entire stake in IDBI Bank and can use its large network of branches to market its insurance services, its chairperson said.
”I, as LIC chairperson, would like to see that the relationship continuing in the future as well. Going forward, we would like to have some stake in IDBI Bank. The whole idea of us picking up stake in the bank was strategic in nature and that has not gone away at all,” LIC Chairman M R Kumar said during a media interaction.
On how much LIC would like to retain out of 49.24 per cent stake in IDBI Bank at present, Kumar said as of now there was no sense of the number as it was up to the Department of Investment and Public Asset Management (DIPAM) to kick off that excercise.
”Since it was a strategic partnership to begin with, we might stick on to some stake in order that we continue our relationship on bancassurance and other areas which are a win-win-win for both LIC and IDBI Bank,” he said.
IDBI Bank became a subsidiary of LIC with effect from January 21, 2019, following the acquisition of an additional 8,27,590,885 equity shares.The insurer had infused Rs 4,743 crore in IDBI Bank on October 23, 2019 using policyholders’ funds while the bank further raised Rs 1,435.1 crore on December 19, 2020 by way of a QIP.
On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of LIC shareholding to 49.24 per cent following the issuance of additional equity shares by the bank under a Qualified Institutional Placement (QIP).
The government, which is the minority shareholder in IDBI Bank with a 45.48 per cent stake, has already expressed its intent to exit by selling the stake to a new private sector promoters and also wants LIC to follow suit.
India’s government and LIC hold over 90% stake in IDBI Bank, which had assets of over Rs 2,900 billion ($38.91 billion) at the end of December and over 1,800 branches across the country. LIC took over the lender when it was weighed down by bad loans and needed a new infusion of capital.
In fact, IDBI Bank has been the strongest contributor for the bancassurance channel, he said, adding that this was something that would help LIC to grow that particular channel in the post-IPO scenario.
Bancassurance is an arrangement between a bank and an insurance company allowing the latter to sell its products to the bank’s customers and others through the branch network.
Elaborating on bancassurance channel, Kumar said LIC has distribution tie up with 58,000 branches of different banks. There is still a lot of scope and headroom for growth on that front, he said adding that the corporation will also be keen on developing exclusive bancassurance products in future.
About new products, he said LIC was working on several participating (par) and non-participating (non-par) policies that would be launched going forward.
LIC filed the Draft Red Herring Prospectus (DRHP) for the Initial Public Offering (IPO) this month.
The government expects to mobilise about Rs 63,000 crore from the proposed Offer for Sale (OFS) to meet the lower disinvestment target of Rs 78,000 crore for the current financial year.
Kumar also said LIC is well capitalised, and potential investors should not worry about government control post the IPO as decisions are taken by its board and not by the government, which will hold a 95% stake after the flotation.
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