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Bank of India sells 18 per cent stake to partner Dai-ichi Life

State-run Bank of India on Tuesday sold 18% stake in Star Union Dai-ichi Life Insurance Company to its Japanese partner for Rs 540 crore, valuing the company at Rs 3,000 crore.

, ET Bureau|
Updated: Jun 22, 2016, 05.50 AM IST
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The deal has happened at a multiple of 3.8 times at enterprise value, which is future profit of present value.
The deal has happened at a multiple of 3.8 times at enterprise value, which is future profit of present value.
MUMBAI: State-run Bank of India on Tuesday sold 18% stake in Star Union Dai-ichi Life Insurance Company to its Japanese partner for Rs 540 crore, valuing the company at Rs 3,000 crore.

Following the transaction, Dai-ichi Life Insurance Company’s share will go up to 44% and it will become the single largest promoter of the company. Bank of India’s share will come down to 30% while Union Bank will continue to hold 26%.

As per the terms of the joint venture, the Japanese insurer had agreed to buy additional 18% state after liberalisation of foreign direct investment norms. Bank of India had agreed to sell 18% when the JV was signed.

“The transfer of shares was basis a pre-defined arrangement as outlined in the JVA,” said Girish Kulkarni, CEO of Star Union Dai-ichi Life Insurance Company. “We have done well in last seven years and it is business-as-usual for us,” he said.

The company had an embedded value of Rs 800 crore at the end of March this year. The deal has happened at a multiple of 3.8 times at enterprise value, which is future profit of present value. This is the highest multiple paid by any foreign partner in the industry. The company had assets under management of Rs 5,500 crore at the end of March. It reported a profit of Rs 27 crore for 2015-16, with a total premium of Rs 1,300 crore.

It has a share capital of Rs 420 crore, which includes the premium paid by the Japanese insurer. The insurance company operates through 11,000 branches of Bank of India and Union Bank. The company has 82 branches and is planning to open another 18 this year, executives said. The government has been nudging public sector banks that are saddled by bad debts to sell their non-core assets. India has four other insurance companies promoted by state-run banks, including SBI Life, Canara HSBC OBC, India First Life Insurance and IDBI Life Insurance.

State Bank of India was the first public sector bank to announce its intentions to sell additional 10% stake in its life insurance company to its foreign partner following the amendment to the Insurance Act announced in March 2015.

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