IDBI Bank likely to sell 23% stakes in IDBI Federal Life Insurance to Belgian Ageas International

IDBI Bank is likely to sell 23 per cent stakes in IDBI Federal Life Insurance Co to Belgian multinational insurer Ageas Insurance International. Published reports suggest that the transaction will close today, December 31, 2020.

Post this deal, Ageas stakes stake in the insurance joint venture will go up to 49 per cent from existing 26 per cent, while IDBI Bank's stakes will reduce from 48 per cent to 25 per cent in the life insurer. Owning 49 per cent stake is the maximum permissible limit under the foreign direct investment (FDI) rules.

Besides, IDBI Bank is also planning to sell an additional 4 per cent stake to Kerala-based private sector Federal Bank in the life insurance JV. This is subject to approval by the regulator, Reserve Bank of India (RBI). Currently, Federal Bank holds a 26 per cent stake.

IDBI Federal Life has an embedded value of around Rs 2,200 crore and this 27 per cent stake sale will help IDBI Bank to raise around Rs 595 crore. This deal would help the bank augment its capital. IDBI's capital adequacy ratio as per Basel-III was 13.67 per cent at the end of September 2020.

IDBI Bank is now owned by Life Insurance Corporation of India (LIC) was in talks to divest its stake in the life insurer for close to two years. The bank earlier in August 2020 informed the exchanges about the share purchase agreement with Ageas Insurance International and Federal Bank.