A life insurance application form (Source: Investment Zen/Flickr) 

Change Of Guard At IDBI Bank May Delay Sale Of IDBI Federal Life Insurance

The stake sale of IDBI Federal Life Insurance Company Ltd. may be delayed beyond September, given the uncertainty around parent IDBI Bank’s future and the appointment of bank CEO MK Jain as deputy governor of the Reserve Bank of India, a person with direct knowledge of the matter told BloombergQuint.

Jain is the authorised signatory to the deal, and talks can resume only after the lender appoints a new head, the person said.

The life insurer, was put on the block last year by its promoters IDBI Bank, Federal Bank and Belgian insurer Ageas, and received binding bids in April from four life insurance companies – Max Life Insurance, Kotak Mahindra Life Insurance, Aditya Birla Sun Life Insurance and Exide Life Insurance. The front runners clearly Max Life and Aditya Birla Sun Life, whose bids were much higher than what was quoted by the other two suitors, said a second person requesting anonymity.

Kotak Mahindra Life Insurance, Aditya Birla Sun Life Insurance and IDBI Bank are yet to respond to BloombergQuint’s emailed queries. Exide Life Insurance and Max Life refused to comment.

IDBI Bank is looking to finalise a buyer at least by the end of the July-September quarter, one of the board members at IDBI Bank told BloombergQuint. But it’s unlikely to meet that deadline as the highest bidder may now pull out of the deal.

Also Read: IDBI Bank Looks To Separate Its Retail, Corporate Lending Verticals

Max Life Seeks Clarity

Max Life has written to IDBI Bank yesterday seeking clarity on the status of bancassurance exclusivity and performance guarantee, given the uncertainty around IDBI Bank’s future, said two separate people aware of the development. That’s after the government approved revised guidelines on time-bound closure of sick and loss-making central public sector enterprises.

Max has sought firm commitment on continuity of bancassurance and performance guarantee for sale of its products. The bank has been asked to clarify these conditions by today, in the absence of which, the insurer will withdraw its bid, the two people quoted above said.

Also Read: Q4 Results: IDBI Bank’s Losses Widen As Gross Bad Loans Surge To 28% 

Valuation

Binding bids value the insurer around 3.3 times the embedded value of the company, said the two people cited above. The company had an embedded value of Rs 1,800 crore at the end of March 2017.

This is a unique proposition as an exclusive bancassurance partnership would be a big advantage for players that want to strengthen their distribution channel, said the person quoted above.

Reports indicated that Max had bid in the region of Rs 6,000 crore for IDBI Federal. A Max spokesperson refused to comment to BloombergQuint's specific query on the value of its bid.

IDBI Bank holds 48 percent in the company, followed by Federal Bank and Belgian insurer Ageas which holds 26 percent each. Ageas acquired 20 percent in December 2015 for Rs 800 crore valuing the company at Rs 4,000 crore. The Belgian insurer eventually increased the stake to 26 percent.

IDBI Life insurance, as of March 31, distributed 80 percent of its policies through the 3,000 bank branches of its promoters — IDBI Bank and Federal Bank. About 6 percent of its sales was through the bank-assisted online channel, and the remaining through agency and broker network.

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