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Warburg, Temasek lead the race for SBI General stakes

The two aforementioned companies are likely to acquire a maximum 9.9 per cent each.

, ET Bureau|
Jul 01, 2019, 07.53 AM IST
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The company reported an underwriting profit of Rs 94 crore in FY18 compared with a loss of Rs 151 crore in FY17.
Mumbai: Private equity group Warburg Pincus and Singapore’s Temasek are the frontrunners to pick up stakes in SBI General Insurance, said people directly involved in the matter. The 26 per cent holding on offer is likely to fetch about Rs 3,250 crore, valuing the business at Rs 12,500 crore, they said.

This would be at a premium to the last round of fund raising in September when Axis New Opportunities Fund and PremjiInvest invested Rs 482 crore for a 4 per cent stake in the country’s 13th largest general insurer at a Rs 12,000 crore valuation.

The two aforementioned companies are likely to acquire a maximum 9.9 per cent each. Ownership over 10 per cent classifies a shareholder as a promoter that has to stay invested for a minimum of five years. PremjiInvest too is likely to add to its stake.

The board of parent State Bank of India (SBI) is to decide on the matter after binding offers were made recently.

The stake sale will help in price discovery ahead of a planned initial public offering (IPO) on the Indian stock markets in FY20. SBI Life, ICICI Prudential, HDFC Life and ICICI Lombard General had conducted similar exercises before listing.

The stake is being sold by Insurance Australia Group (IAG) as part of a regional revamp. The biggest Australian insurer, which had mandated Goldman Sachs to find a buyer for its stake, has already exited Indonesia, Thailand and Vietnam. India and Malaysia are next on the agenda, ET reported on February 13. Last year, IAG said it would sell its Thai and Indonesian operations to Japanese insurer Tokio Marine Holdings for $390 million.

In December 2016, IAG had expressed its interest in raising the stake to 49 per cent over in the next two years. It paid Rs 542 crore for its 26 per cent stake in the joint venture, which started in 2010.

“As advised at the 1H19 results, AIG continues to assess options for its joint venture interests in Asia, including its interest in SBIG,” said spokesperson Amanda Wallace. “Discussions have been held with external parties regarding a potential sale of all or part of IAG’s 26 per cent interest. There is no certainty a transaction will occur.”

Temasek declined to comment. Warburg Pincus and PremjiInvest did not respond to ET’s queries.

Last week, Warburg sold a 3 per cent stake in ICICI Lombard — a competing business — in the open market, a move many see as a precursor to an SBI General transaction.

SBI General has a share capital of Rs 210 crore. Return on equity almost doubled from 13.9 per cent in FY17 to 26.5 per cent in FY18. It recorded a 32.83 per cent growth in gross written premiums in FY19 at Rs 4,717 crore, compared with broader industry growth of 12.95 per cent.

The company reported an underwriting profit of Rs 94 crore in FY18 compared with a loss of Rs 151 crore in FY17. The improvement in the underwriting performance was further bolstered by investment portfolio related income, which grew 15 per cent to Rs 392 crore from FY17, ICRA said in a credit report. This resulted in an improvement in net profit after tax to Rs 396 crore in FY18.

The insurer relies heavily on the exclusive bancassurance tie-up with its parent, the largest bank in the country, with 23,000 branches, and more than 5,500 regional rural banks giving it a footprint across 110 cities. Additionally, it has also entered into strategic partnerships with four large car manufacturers to drive growth in the auto portfolio.

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