(In insurance ventures, banks can hold either less than 30% or more than 50% in accordance with the Reserve Bank of India guidelines.)
ICICI Bank (the bank) currently holds 48.02% stake in ICICI Lombard (Lombard). Originally, the plan of ICICI bank was to reduce this stake to 30% for which RBI had allowed the bank time till September 9, 2024.
Now there has been a change of heart and the bank has decided to instead increase it to more than 50% by the designated date.
Accordingly, the bank has approved an increase in shareholding in Lombard, in multiple tranches up to 4.0% additional shareholding and make the Company, a subsidiary of the ICICI Bank, subject to receipt of necessary regulatory approval(s).
ICICI Bank would acquire atleast 2.5% stake out of the above 4.0% before September 9, 2024 to comply with the RBI allowed timelines.
Reason for change of the strategy has not been disclosed. Possible reasons could be –
- Current suppressed sentiments around the Indian insurance sector and hence lower prevailing valuations
- Overall further strengthening of the ICICI group in the last few years and hence non urgency to dilute
- Both of the above
Pending significant supply of shares due to stake sell by the bank has been one of the key overhangs on Lombard’s stock price. Now that being out of the way, everyone is hoping the stock will start outperforming.