Andhra Bank plans stake sale in IndiaFirst Life

Andhra Bank intends to sell its 30 per cent stake in IndiaFirst Life Insurance Company either in part or in full. By doing so, it aspires to raise Rs. 900 crore. One of the candidates who could potentially purchase the stake is the existing investor, Warburg Pincus.

Earlier, Warburg Pincus had acquired a 26 per cent stake in IndiaFirst Life Insurance. It had purchased the same from UK-based Legal & General Group in June 2018 for a sum of Rs. 710 crore.

In December 2018, Andhra Bank had made a statement stating it would be selling its stake in the life insurance business. Presently, Bank of Baroda owns 44 per cent stake in IndiaFirst, while Andhra Bank holds 30 per cent. Warburg Pincus is permitted to acquire further 23 per cent stake in addition to the 26 per cent stake it already owns.

The limit for foreign direct investment in insurance is now set at 49 per cent. This could render the American private equity firm the largest shareholder of the insurer.

In its request for a proposal letter, Andhra Bank stated that it wants to divest its stake in India First Life, either partially or fully, in harmony with provisions of the joint venture agreement. It has issued the request for proposal for the appointment of an expert to conduct independent equity evaluation of the stake on a per-share basis.

In 2017-2018, Andhra Bank was in receipt of funds to the tune of Rs. 32 crore as fees from bancassurance for selling life insurance products. During the financial year 2017-2018, the bank had mobilized new business premiums including retail and group business of Rs. 190.88 crore and renewal premium of Rs. 21,431 crore. Furthermore, Andhra Bank also sells general insurance products of United India Insurance, Reliance General and Cigna TTK Health.

On Wednesday, the shares of Andhra Bank opened at Rs. 23.50 per share, and hit a high and low of Rs. 23.95 and Rs. 23.40, respectively. At 10:56 am, the stock was trading at Rs. 23.60, up 0.85 per cent.