IDBI Bank said on Thursday it has signed a share purchase agreement with Federal Bank and its Dutch partner Ageas Insurance International NV to offload 27 per cent stake in IDBI Federal Life Insurance (IFLI) at a combined value of Rs 595 crore.
The transaction is expected to be completed by end of Q3 (October to December).
IDBI Bank has 48 per cent stake in IFLI which started operations in 2008. Federal Bank and its Dutch partner Ageas have 26 per cent stake each.
IDBI Bank will now divest 23 per cent of its stake to Ageas and 4 per cent to Federal Bank. By selling 27 per cent stake in the venture, IDBI Bank will get its holding down to 21 per cent.
"The decision is subject to regulatory approvals and satisfaction of the terms and conditions set out in the share purchase agreement," it said in a statement.
Federal Bank's holding will now go up to 30 per cent and Ageas' to 49 per cent, the maximum permissible for a foreign partner in a life insurance venture.
During 2018-19, Life Insurance Corporation (LIC) had acquired 51 per cent controlling stake in IDBI Bank.
The process of acquisition was completed on January 21, 2019, with LIC being re-classified as a promoter of the bank with management control and the government continuing to be the co-promoter without management control.
As per insurance regulations, an insurer cannot own more than 10 per cent stake in another insurer. Since LIC owns 51 per cent stake in IDBI Bank and the latter owns 48 per cent stake in IDBI Federal Life Insurance Company, the bank has to divest its stake in its insurance joint venture.
( With inputs from ANI )