The State Bank of India (SBI) will start the process of selling up to 4 per cent of its stake in joint venture SBI General Insurance Co, which is planning an initial public offering.
The lender’s move follows the green signal to explore and initiate the process of partial stake sale in the insurer to a non-promoter entity from its central board’s executive committee, according to SBI’s exchange filing on Thursday.
The divestment method would be small parcel share sale, which does not involve shareholders incurring any cost.
“Pursuant to the applicable provisions of the SEBI (LODR) Regulations, we advise that Executive Committee of Central Board (ECCB) in its meeting held today on August 9, 2018, has accorded approval to explore and initiate the process of divestment up to 4 percent of stake of SBI in SBI General lnsurance Company Limited to a non-promoter entity through Small Parcel Share Sale (SPSS),” SBI said in a filing to the stock exchanges.
SPSS involves sale without the shareholder incurring any brokerage or sale costs.
SBI holds 74 per cent stake in SBI General, while the rest of it is held by the joint venture partner Insurance Australia Group.
The stake sale is part of SBI’s strategy to unlock value of its subsidiaries.
The company had kick started FY 2018-19 with strong note including a net profit of Rs 113 crore, an underwriting profit of Rs 7 cr and a positive combined ratio of 99 per cent in Q1.
It had a profit before tax of Rs 113 cr in the reporting quarter as against Rs 50 cr in Q1 FY 17-18. However, the company had not paid any taxes during the reporting quarter as it had losses in earlier yeas.
Rikhil Shah, CFO, SBI General Insurance said, “Our entire accumulated losses have been wiped out and we are likely to achieve a growth of 20 % in ROE post tax by the fiscal-end.We have witnessed a growth of 52% in Q1 FY 18-19 against an industry growth of 12%. We are looking 30 per cent of topline growth by the end of the fiscal. Also, we are looking at ROE growth by 20 per cent in the current fiscal.”