Banks Reap A Windfall In Insurance Arm IPOs

Initial public offerings of insurance companies have brought a windfall for lenders as they ride on a stock market rally and growing demand for financial assets to take their subsidiaries public.

ICICI Prudential Life Insurance Company, was the first pure-play life insurer to tap the primary market in September last year, giving nine times returns worth Rs 5,400 crore on the shares ICICI Bank Ltd. sold. India’s second largest lender by assets earned another Rs 1,960 crore by selling shares in ICICI Lombard General Insurance Company, a 15-fold gain.

The country’s largest bank, State Bank of India, is expected to net Rs 5,500 crore from the part-sale of its stake in SBI Life, according to BloombergQuint’s calculations based on the upper end of the IPO price band.

In all, investors’ gains from selling shares in the three IPOs would cross Rs 18,400 crore. The proceeds will shore up capital buffers of lenders, who will corner more than two-thirds of the returns.

Mortgage giant HDFC Ltd. has also hired merchant bankers to sell shares in the initial offer of its insurance venture.

Public sector general insurers have also lined up IPOs as the government looks to offload part of its holding to meet its divestment target of Rs 72,500 crore for the year ending March. State-run GIC, the country’s only homegrown reinsurer is likely to raise Rs 8,000-10,000 crore, two bankers privy to the details had told BloombergQuint requesting anonymity. New India Assurance has also filed its prospectus for an IPO.