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Allahabad Bank to sell its 30% stake in Sompo Insurance

Kolkata: State-run lender Allahabad Bank has set a medium term target to sell its 30 per cent stake at Universal Sompo General Insurance Company as the government is insisting sale of non-core assets.

The bank’s chief executive Usha Ananthasubramanian told ET that the non-life insurer is doing well and may get listed after two years with improved valuation, and that could be the best time to sell the shares.

“We are not desperate at this point of time, but it is on the back of our mind and we may do it at the right time. If there is pressure on capital, I think that will be the time to consider it,” she said.

Indian Overseas Bank holds 19 per cent in Universal Sompo, while Karnataka Bank has 15 per cent, and non-bank promoter Dabur Investments 10 per cent. The overseas partner Sompo Japan Nipponkoa Insurance Inc holds 26 per cent in it.

The non-life insurer is in the process of raising capital by way of rights issue of shares, chairman ON Singh said, adding that the size of the issue will be finalized next month.

Allahabad Bank may not subscribe to the rights share since it is looking to exit the “strategic investment” in the medium run. IOB, which has been under Reserve Bank of India’s prompt correction action plan for facing severely high stressed asset ratio and depletion of capital, may not participate either and these would allow Sompo to buy their shares and hold more than 26 per cent.

“Sompo is very keen to raise its stake. When they bring in fresh capital, our holding will automatically come down, but we won’t like to go below 26 per cent as of now,” said Ananthasubramanian.

The Mumbai-based insurance joint venture is making profits, according to Singh, and has its gross written premium at Rs 800 crore for the first six months of the fiscal. It closed FY17 with Rs 1,287 crore premium.

“The company is getting more robust. It is in profit and therefore the accumulated losses will be wiped out soon. It is likely that we get good valuation in the days to come. When we can realise a higher value, it’s better to wait for it,” Ananthasubramanian explained.

Allahabad Bank, which has just raised Rs 700 crore in bonds, is in the process of raising Rs 1000 crore in qualified institutional placement of shares. It is also looking to raise another Rs 300-350 crore by issuing employee stock purchase scheme, and is also expected to get government capital as part of the bank recapitalization plan.
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