ICICI Bank is all set to increase its stake in ICICI Lombard to over 50%. It plans to do so through the acquisition of up to 2.21 crore equity shares of the insurance company, which amounts to a 3.96% stake. This acquisition will be carried out through a series of transactions, which includes a preferential allotment of shares, a block deal, and an open offer to public shareholders.
This decision to increase its stake in ICICI Lombard is in line with ICICI Bank’s recent strategy of focusing on its subsidiaries. It will not only increase the bank's control over the insurance company’s operations but also help reap the benefits of synergy between banking and insurance.
As a result of this announcement, ICICI Lombard's shares have witnessed an upward trend, increasing by over 6%. The market capitalisation of the company has also risen to approximately Rs 42,000 crore.
Moreover, this move is expected to strengthen the partnership between ICICI Bank and Fairfax Financial Holdings which currently holds a 22.13% stake in ICICI Lombard. Fairfax Financial Holdings has agreed to participate in the open offer and maintain its stake in ICICI Lombard.
ICICI Bank’s stake in ICICI Lombard stood at 48.02% at the end of March 2023. In 2019, in order to shield the lender from the risks associated with other, non-core industries, the Reserve Bank of India (RBI) had requested banks cut their ownership in their insurance ventures. On account, ICICI Bank decreased its ownership of ICICI Lombard from 52 percent to 48 percent in September 2021. The insurance regulator, however, believed that if promoters don't own a controlling share, they don't have much at stake. However, a month ago, in response to a clarification request from HDFC bank, RBI permitted HDFC Bank to increase shareholding in its insurance business.
The move by ICICI Bank to increase its stake in ICICI Lombard is in sync with latest decision by RBI.
Overall, ICICI Bank’s decision to increase its stake in ICICI Lombard seems like a strategic move that will not only benefit the bank but also the insurance company.
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