Warburg Pincus, Premji Invest to buy IAG’s stake in SBI General for $432 million

Mumbai: Insurance Australia Group (IAG), which holds 26% stake in SBI General Insurance, on Thursday, said it has signed a definitive agreement to sell its entire stake to private equity firms Warburg Pincus and Premji Invest.

While Premji Invest will acquire 16% stake in the general insurer, Warburg Pincus plans to buy the remaining 10%, giving an exit to IAG.

The transaction, subject to regulatory approvals, is expected to be completed by 30 June, 2020.

The deal amounts to over A$640 million ($432.38 million), based on the current exchange rate, according to a press statement released by IAG on Thursday.

“IAG has enjoyed a strong and successful relationship with the State Bank of India since establishing the SBIG joint venture in 2009. With our sharpened focus on our core territories of Australia and New Zealand, now is the right time for IAG to exit its investment in SBIG," said Peter Harmer, managing director and chief executive officer of IAG.

Once the deal is complete, India’s largest lender State Bank of India (SBI) will continue to hold 70% in its general insurance arm. The remaining 16.01% will be held by Napean Opportunities Llp (an affiliate of Premji Invest), 9.99% by WP Honey Wheat Investment Ltd., an investment vehicle of Warburg Pincus. Besides, PI Opportunities Fund-1 will hold 2.35% and Axis New Opportunities AIF – I will hold 1.65% stake in the company.

“SBIG (SBI General) has a high-quality management team having an institutional framework with systems and processes in place. This is demonstrated through consistent high growth and positive underwriting results. We extend our heartfelt appreciation to IAG, the outgoing partner, who has progressively collaborated with us in building SBIG to the level where it stands today," said Dinesh Kumar Khara, managing director of GB & S-wing at SBI.

The development comes after SBI Chairman Rajnish Kumar said the bank had dropped its plan to take its general insurance arm public as there was no immediate need for additional capital. SBI was earlier looking to list SBI General Insurance in fiscal year 2021.

In November 2018, SBI sold 4% stake in SBI General Insurance for ₹482 crore (around $66 million) to two alternative investment funds (AIFs)—Axis New Opportunities AIF-I and PI Opportunities Fund-I, an AIF of Premji Invest. The transaction valued SBI General Insurance at over ₹12,000 crore.

SBI General Insurance sells motor, health, personal accident, travel and home insurance to retail customers and aviation, fire, marine, liability and cyber defence insurance policies in the commercial space. With presence in over 110 cities across India, the insurer had a market share of 3.24% as of September, among general and standalone health insurers.