SBI to sell 3.9% stake in SBI Life Insurance

The fact that State Bank of India (SBI) would sell some stake in its life insurance subsidiary was widely known in the market. But, nobody anticipated the deal for the sale of 3.9 per cent stake in this business for Rs 1,794 crores, as announced on Friday, 9^th December 2016, after market hours.

This deal values SBI Life Insurance Company (SBI Life) somewhere at Rs 46,000 crores, making it the most valued private life insurance firm, pending the HDFC Life-Max Life merger. This latest valuation is also much ahead of experts’ recently revised valuation estimates ranging Rs 32,000 crores to Rs 39,000 crores. These valuation estimates of SBI Life were revised upwards by the analysts in the month of August this year when the bank for the first time disclosed the embedded value (EV) of SBI Life.

The embedded value is calculated by adding the adjusted net asset value along with the present value of future profits of a firm and is a measure of interest of the shareholders in the covered business of a company. The embedded value stood at Rs 12,999 crores as on 31^st March, 2016, ahead of analysts’ estimates of Rs 8,000 crores to Rs 10,000 crores back then. This deal thus will boost SBI’s sum of the parts (SOTP) valuations for the second time this year.

Arundhati Bhattacharya, the chairman of SBI said that the partnership with KKR and Temasek is recognition of the efforts of SBI Life’s commitment to create a high quality institution which is a leader in the private Indian life insurance space. Moreover, this transaction values SBI Life at Rs 46,000 crores, reflecting significant value creation since its inception in the year 2001.

The deal involves sale of 39 million shares at the value of Rs 460 apiece. SBI said the bank’s Executive Committee of the Central Board has approved divestment of this stake, to private equity players. An investment vehicle affiliated with KKR-managed funds and an affiliate of Temasek, the Singapore-based Investment Company, will each purchase 19.5 million shares of SBI Life from SBI. Upon completion of the said transaction, SBI will hold 70.1 per cent stake in SBI Life while its joint venture partner, BNP Paribas Cardif, will continue to hold 26 per cent.

On the market front SBI share price closed at Rs 266.65 apiece on NSE on Friday, 10th December 2016.

Get the historical share price performance of SBI at SBI share price history.