Tag: divestment

Poonawalla Fincorp board okays Magma HDI stake divestment

Banking & Finance

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The board of directors of Poonawalla Fincorp Ltd (PFL) has approved divestment of the company’s direct and indirect shareholding in Magma HDI General Insurance in order to comply with requirements of the Reserve Bank of India and IRDAI.

Sanoti Properties, held by Adar Poonawalla and Serum Institute of India, has agreed to acquire the direct and indirect stake of the company in Magma HDI.

“This structure is in line with other financial services groups with NBFC and general insurance operations and will allow a framework for continued business relationship between PFL and Magma HDI,” PFL said in a statement on Tuesday.

Also see: Poonawalla Fincorp: Consolidated PBT up 151% YoY

PFL will also divest its 48.89 per cent shareholding in Jaguar Advisory which, consequent to the above divestment in MHDI shares, will own only cash and cash equivalent, to Celica Developers, the joint venture partner in Jaguar Advisory.

Regulatory compliance

IRDAI’s Registration of Insurance Companies Regulations stipulates that a promoter of an insurance company cannot be a subsidiary of another company. Post the acquisition of PFL by Rising Sun Holdings in May 2021, PFL has become a subsidiary of RSH. As a result, IRDAI sought compliance from Magma HDI regarding its shareholding structure.

PFL is a joint venture partner in Magma HDI with Celica Developers, Jaguar Advisory and HDI Global SE.

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Edelweiss gets nod, divests stake in insurance broking business

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Edelweiss Group on Monday announced the divestment of its majority stake in Edelweiss Gallagher Insurance Brokers Ltd (EGIBL) after approval from the Insurance Regulatory and Development Authority of India (IRDAI).

On receipt of the necessary approvals, the company, has in the first tranche, transferred 61 per cent of the stake held by the company in EGIBL to Arthur J Gallagher and Company (AJG) on October 18, 2021, Edelweiss Group said in a stock exchange filing.

“Consequently, AJG now owns 91 per cent of EGIBL, as a result of which EGIBL has ceased to be the subsidiary of the company,” it further said.

Gallagher and Edelweiss had announced the transaction in July 2021 under which Gallagher, which previously held 30 per cent stake in the business, bought out the 70 per cent stake of Edelweiss Group in the company.

“The business will transition to the Gallagher brand in the coming months,” Edelweiss Group said in a statement, adding that it will will focus on growing its life and non-life insurance businesses, which have been among the fastest-growing in the industry.

Rashesh Shah, Chairman, Edelweiss Group said, “This move brings to us the flexibility to reallocate capital, which post this transaction and the strategic partnership in our Wealth Business, is ample. We now have adequate capital and a stronger balance sheet and look forward to scaling up our fast-growing life and non-life insurance businesses, as India turns a corner post the Covid pandemic.”

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RRB employees to observe one-day strike on September 27 against govt’s divestment plan, BFSI News, ET BFSI

Banking & Finance

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The regional rural bank (RRB) employees are going to observe a one-day strike on September 27 opposing the government’s plan to divest its 50% share in each of the rural banks in favour of their respective sponsor banks.

The employee unions are instead demanding formation of a national rural regional bank and delinking of it with any sponsor bank. The union flag bearers are of the view that there has always been conflicts of interest between mainstream commercial banks and the RRBs they sponsor.

India has 43 RRBs with a network of around 22,000 branches mostly in the hinterlands to ensure banking facilities for farmers and artisans. These banks collectively employ one lakh people.

The central government holds 50% in each of the RRBs while their respective sponsor banks hold 35%. The balance 15% in RRBs is held by the respective state governments according to their areas of operation. For example, West Bengal has three RRBs within its boundary and the state holds 15% in each of these banks.

The All India Regional Rural Bank Employees Association, a coordinating body of National Federation of RRB Officers & National Federation of RRB Employees, said that relinquishing central government share would eventually lead to privatisation and that’s why they are opposing it.

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IDFC board approves divestment of mutual fund business

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The Board of Directors of IDFC Ltd and IDFC Financial Holding Company Ltd (IDFC FHCL) at their meetings held on Friday considered and approved to initiate steps to divest the mutual fund business — IDFC Asset Management Company (IDFC AMC) Ltd.

IDFC AMC is the direct subsidiary of IDFC FHCL and indirect subsidiary of IDFC. As on March 31, 2021, IDFC held 99.96 per cent in IDFC AMC.

IDFC AMC’s average assets under management (AAUM) for the June quarter was at ₹1,26,070 crore, as per AMFI data.

IDFC, in a regulatory filing, said the disinvestment is subject to requisite regulatory approvals, as applicable.

The Boards have authorised respective Strategy & Investment Committees to take necessary steps, including appointment of Investment Banker, for the same, as per the filing.

IDFC losing investor confidence over delay in value unlocking

Investors upset

At a pre-annual general meeting conference call held on September 14, investors expressed disappointment with the slow pace of progress of the disinvestment.

While one investor wanted IDFC to immediately divest its stake in its asset management company (AMC), failing which he said he will reach out to other investors to seek a change in management; another investor, referring to the performance of the stock, alleged value destruction for shareholders.

RBI approves re-appointment of Vaidyanathan as IDFC FIRST Bank chief

Vinod Rai, Non-Executive Chairman, IDFC, explained that it has taken the company the last 3-4 years to try and simplify the entire corporate structure and it has managed to remove all the other entities, except the Bank, AMC and the Foundation.

“Now, what we are grappling with today is the IDFC Foundation. It has two joint ventures under it — one is with the Government of Delhi and another is with the Government of Karnataka.”

In his statement to the shareholders in the latest annual report, Rai observed that in pursuit of creating maximum value for shareholders, over the last few years the Board has been focused on cleaning up the corporate structure of the IDFC Group, while awaiting the expiry of the 5-year lock in period for the Group as promoter of IDFC FIRST Bank.

The Reserve Bank of India vide their letter dated July 20, 2021, has clarified that after expiry of the ‘lock in’ period of five years, IDFC can exit as promoter of IDFC FIRST Bank.

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Govt. to disinvest two public sector banks & one public general insurance company, BFSI News, ET BFSI

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Finance Minister, Nirmala Sitharaman in her Budget 2021 speech has announced the disinvestment of two public sector banks and one general insurance company.

She said, “In spite of COVID-19, we have kept working towards strategic disinvestment. A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22. Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this Session itself.”

PNB’s MD & CEO, CH S. S. Mallikarjuna Rao is also of the opinion that divestment of 2 PSU Banks and 1 public insurer is in the right direction. He said, “The move to strategically divest 2 Public Sector Banks and 1 general insurance company, are steps in the right direction.”

Padmaja Chunduru, MD & CEO of Indian Bank said, “Stake sale by government in public sector companies and financial institutions, including 2 PSBs and one insurance company, in the next fiscal year is a welcome move.”



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