Shares of ICICI Lombard General Insurance Company (ICICI Lombard) rallied 14 per cent in Monday's trade after ICICI Bank said its board has approved an increase in shareholding in the general insurance company, by up to 4 per cent in multiple tranches, as permissible under applicable law. This will be to ensure compliance with the Section 19(2) of the Banking Regulation Act, 1949 and make ICICI Lombard, a subsidiary of ICICI Bank, subject to receipt of necessary regulatory approvals.
ICICI Bank would acquire at least 2.5 per cent stake out of the above 4 per cent, before September 9, 2024, ICICI Lombard told exchanges.
Following the development, the ICICI Lombard stock jumped 14.25 per cent to hit a high of Rs 1,256.70 on BSE. That said, the stock is still down 3.24 per cent year-to-date.
Earlier, the company had informed about an extension in timeline granted by the Reserve Bank of India (RBI) for
divesting ICICI Bank’s shareholding in ICICI Lombard General Insurance Company to less than 30 per cent of the Company’s paid up capital till September 9, 2024. As on March 31, 2023, ICICI Bank held 48.02 per cent in the company.
Shares of ICICI Bank were up 0.55 per cent at Rs 955.75 on BSE.
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Post-merger with Bharti AXA, the stake of ICICI Bank in ICICI Lombard had reduced to 48.02 per cent owing to the fresh issue of shares. As per the RBI regulations, ICICI Bank had to reduce the stake to 30 per cent by September 2023. but the apex bank in March extended the timeline to September 2024.
This, Motilal Oswal said, was a key overhang for the ICICI Lombard stock since the merger announcement with Bharti AXA in August 2020.
"We note that the stock has seen a massive de-rating in its valuations in P/E terms to 28 times currently from 55 times in December 2020," it said.
Post-announcement of the merger between HDFC Bank and HDFC, the stake of the merged entity in HDFC Life would have stood at 48.65 per cent.
"Akin to the reaction for ICICI Lombard stock, HDFC Life too underwent a de-rating. However, in April 2023, the RBI offered relaxation to the HDFC-HDFC Bank merged entity to own more than 50 per cent stake in HDFC Life. This sets precedence for ICICI Bank to enhance its stake in ICICI Lombard," Motilal Oswal said while suggesting a target of Rs 1,400 for ICICI Lombard.
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