ICICI Bank has received the green light from the Insurance Regulatory and Development Authority of India (IRDAI) to boost its ownership stake in ICICI Lombard General Insurance by an additional 4 per cent. This move will make ICICI Lombard a subsidiary of the bank. As of June 2023, ICICI Bank already held a 48.01 per cent stake in the insurance company. This strategic decision aligns with ICICI Bank's goal of strengthening its presence in the insurance sector.
In May, ICICI Bank announced its board's approval of a proposal to increase its stake in ICICI Lombard General Insurance in multiple tranches. This approval from IRDAI marks a significant step in the bank's plan to enhance its position in the insurance industry. The bank will have until August 31, 2024, to complete the stake acquisition through one or more tranches.
ICICI Bank's share price experienced a slight dip of 0.5 per cent on September 4, amid a relatively flat benchmark market, trading at Rs 964 at 10:10 am. In contrast, ICICI Lombard General Insurance shares initially surged by as much as 4 per cent during morning trading but later settled with a 1 per cent increase at Rs 1,354.
This move towards acquiring a higher stake in ICICI Lombard General Insurance demonstrates ICICI Bank's commitment to the insurance sector. Previously, in 2021, the bank had reduced its stake in the insurance company from 51.87 per cent to 48.08 per cent. This reduction followed ICICI Lombard's acquisition of Bharti AXA General Insurance, during which it allotted 35,756,194 equity shares to the existing shareholders of Bharti AXA.
The Reserve Bank of India (RBI) had given its approval for the bank's proposal to increase its shareholding on August 4, 2023. This regulatory clearance from both RBI and IRDAI paves the way for ICICI Bank to further consolidate its position in the insurance market.
ICICI Lombard General Insurance Company, established in 2002, initially began as a joint venture between ICICI Bank and Fairfax Financial Holdings. However, in 2019, Fairfax exited the company. This strategic shift in ownership did not deter ICICI Lombard's growth, as it continued to perform well in the insurance sector.
Despite the minor dip in ICICI Bank's share price following this announcement, the bank has witnessed an overall positive trend in recent months, with its shares gaining 11.51 per cent in the last six months. In parallel, ICICI Lombard General Insurance has demonstrated strong performance, delivering a return of 23.56 per cent during the same period.
This move to strengthen its foothold in ICICI Lombard General Insurance is part of ICICI Bank's broader strategy to diversify its services and expand its presence in the financial services sector. The bank recognizes the potential for growth and profitability in the insurance industry and aims to leverage this opportunity to benefit its shareholders and customers alike.
