SBI launches OFS to sell stake in life insurance biz

  • At the floor price, State Bank of India will fetch ₹3,465 crore if it sells the entire 4.5% stake in SBI Life Insurance Co.
  • Stock exchange filings show, SBI is looking to sell up to 3.5% through the OFS, with an option to sell an additional 1%.

State Bank of India (SBI), India’s largest lender, on Thursday launched a two-day offer for sale (OFS) to sell a 4.5% stake in SBI Life Insurance Co. Ltd.

Stock exchange filings show, SBI is looking to sell up to 3.5% through the OFS, with an option to sell an additional 1%.

SBI Life started as a joint venture between the public sector lender and France’s BNP Paribas Cardif.

It has priced the secondary share sale at ₹770 apiece, a discount of 3.6% to the stock’s closing price of ₹798.75 on Wednesday. Shares of SBI Life closed at ₹791.9 apiece, down 0.86% on the BSE on Thursday.

At the floor price, SBI will fetch ₹3,465 crore (about $487 million), if it sells the entire 4.5% stake.

The stake sale will help the company comply with minimum public shareholding norms (of 25%), SBI said in exchange filings.

The secondary share sale, which opened for institutional and non-retail investors on Thursday, was subscribed 2.7 times.

For retail investors, the share sale will open on Friday.

Investment banks Sbi cap Securities Ltd, HSBC and Nomura are managing the share sale.

SBI Life went public in September 2017 with an initial public offering, which saw SBI selling 8% and BNP Paribas Cardif selling a 4% stake. The total IPO size was worth ₹8,400 crore, with SBI raising around ₹5,600 crore and BNP Paribas Cardif around ₹2,800 crore.

In December 2016, SBI had sold a 3.9% stake to investors KKR and Co. LP and Temasek Holdings. To meet the minimum public shareholding norms, BNP has sold parts of its stake thrice this year.

This is the first time that SBI is selling its stake in the life insurer since it went public.

On 1 March, global private equity firm Carlyle Group had acquired a 9% stake in SBI Life from BNP for around ₹4,600 crore.

In March-end, BNP sold another tranche of over 50 million shares, while in June it sold a 2.5% stake through the OFS route at ₹650 per share. As on 30 June, SBI held a 62.1% stake, while BNP held 5.2%

While BNP’s stake sale to Cardif reduced promoter shareholding to 75%, thus achieving minimum public shareholding of 25%, the stake sale did not fit with the Securities and Exchange Board of India’s regulations. Hence, SBI and BNP were required to sell more stakes to comply with the Sebi norms.

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