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ICICI, HDFC and SBI set to discharge Rs 1.21 lakh crore worth equity shares

As per reports, SBI, HDFC and ICICI Bank will repay equity worth Rs 1.21 lakh crore.

This will happen if the central bank proceeds with its plan to have banks limit their stake in insurance weapon.

Moreover, monetary authority is uncomfortable with banks controlling non-core businesses such as insurance companies that are capital guzzlers.

Further, these insurance companies want banks to limit ownership of insurance weapons or companies to a maximum of 20 percent.

Axis Bank’s plan has recently received RBI’s nod to purchase Max Life after it agreed to hold only 10 percent. Also, it curbed the overall holding at 20 percent.

At present, the regulations enable banks to hold more than 50 percent stake in insurance arms.

RBI should compel promoter banks/NBFCs to reduce their stakes to 20 percent. This will significantly surge free float in the four listed insurance arms i.e.HDFC, ICICI Bank and SBI.

Currently, HDFC holds 50 percent stake in HDFC Life which can be lowered to 20 percent.

This will off load equity worth Rs 44,100 crore, at today’s market value.

Meanwhile, the bank owns 51 percent in ICICI Prudential Life which is worth Rs 22,100 crore of shares.

However, the bank also owns 52 percent in ICICI Lombard which is equivalent to Rs 21,700 crore worth of shares.

In fact, SBI which holds 55 percent stake in SBI Life will have to sell shares worth Rs 32,200 crore.

Moving forward, the aggregate value of their excess holding is worth Rs 1,20,100 crore respectively.

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