IPO-bound Life Insurance Corporation (LIC) on Monday said it would like to retain some stake in IDBI Bank so that the insurer continues to reap the benefits of the bancassurance channel.
IDBI Bank became a subsidiary of LIC with effect from January 21, 2019, following the acquisition of an additional 8,27,590,885 equity shares.
On December 19, 2020, IDBI Bank was reclassified as an associate company due to the reduction of LIC shareholding to 49.24 per cent following the issuance of additional equity shares by the bank under a Qualified Institutional Placement (QIP).
The government, which is the minority shareholder in IDBI Bank with a 45.48 per cent stake, has already expressed its intent to exit by selling the stake.
"Going forward, we would like to have some stake in IDBI Bank. The whole idea of us picking up stake in the bank was strategic in nature and that has not gone away at all," LIC Chairman M R Kumar said during a media interaction.
In fact, IDBI Bank has been the strongest contributor for the bancassurance channel, he said, adding that this was something that would help LIC to grow that particular channel in the post-IPO scenario.
Bancassurance is an arrangement between a bank and an insurance company allowing the latter to sell its products to the bank's customers and others through the branch network.
"I, as LIC Chairperson, would like to see the relationship continuing in the future as well," he said.
On how much LIC would like to retain out of 49.24 per cent stake in IDBI Bank at present, Kumar said as of now there was no sense of the number as it was up to the Department of Investment and Public Asset Management (DIPAM) to kick off that exercise.
"Since it was a strategic partnership, to begin with, we might stick on to some stake in order that we continue our relationship on bancassurance and other areas which are a win-win-win for both LIC and IDBI Bank," he said.
Elaborating on the bancassurance channel, Kumar said LIC has distribution tie-up with 58,000 branches of different banks. There is still a lot of scope and headroom for growth on that front, he added.
About new products, he said LIC was working on several participating (par) and non-participating (non-par) policies that would be launched going forward.
LIC filed the Draft Red Herring Prospectus (DRHP) for the Initial Public Offering (IPO) this month. The government expects to mobilise about Rs 63,000 crore from the proposed Offer for Sale (OFS) to meet the lower disinvestment target of Rs 78,000 crore for the current financial year.
The insurer had infused Rs 4,743 crore in IDBI Bank on October 23, 2019, using policyholders' funds while the bank further raised Rs 1,435.1 crore on December 19, 2020, by way of a QIP.
IDBI Bank has come out of the prompt corrective action framework in March 2021, subject to compliance with certain conditions and continuous monitoring.
