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SBI Life Insurance to raise $1.3 billion from India IPO

HDFC Life, ICICI Lombard among other insurers set to sell shares

MUMBAI (NewsRise) -- India's SBI Life Insurance Co. plans to raise as much as 84 billion rupees ($1.30 billion) this month in what could be the largest initial public offering in the south Asian nation in seven years.

The share sale of SBI Life -- a joint venture between the nation's biggest lender State Bank of India and France's BNP Paribas Cardiff - will help propel India's IPO market to a record this fiscal year. A clutch of private and state-owned insurers including HDFC Life and National Insurance Co. are set to tap the stock market later this year. ICICI Lombard, a unit of ICICI Bank, is set to open its 57 billion-rupee IPO for subscription this week.

SBI is selling 80 million shares, or an 8% stake, in the venture while BNP Paribas offloads 4%, or 40 million shares. The IPO will be open for subscription for three days starting next Wednesday, SBI said in a statement on Tuesday. The price band of the IPO is set at 685 rupees to 700 rupees a share, valuing the company at about 700 billion rupees.

SBI Chairman Arundhati Bhattacharya said the bank aims to "unlock the capital" it has invested in the life insurance unit through the IPO. The Mumbai-based lender aims to use the proceeds to provide for the massive bad debt on its books, she said.

"At this point of time, we do believe we can make faster provisioning if we get more of these kinds of capital back in the bank," Bhattacharya told reporters. "We will be using at least a part of it (the IPO funds) for that purpose."

SBI Life Insurance will list on the exchanges on Oct. 3, she said.

After the IPO, SBI's stake in the company will be reduced to 62.1% from 70.1% now, while BNP Paribas' holding will come down to 22% from 26%.

Arijit Basu, managing director and chief executive of SBI Life Insurance, said the company does not require any fresh capital in the next three years. "Our capital requirements are adequately met from our retained earnings as of now."

In the fiscal year ended in March, SBI Life earned a net premium of 208.52 billion rupees, a 33% jump over the previous year, the company said in a regulatory filing.

JM Financial Institutional Securities, Axis Capital, and Citigroup Global Markets India are among the nine lead managers of the IPO.

SBI Life is the first life insurance company to tread India's capital markets after ICICI Prudential, the life insurance unit of India's largest private sector lender ICICI Bank, sold shares last September. ICICI Prudential's share sale of more than $900 million, the largest since Coal India's $2.4 billion IPO in 2010, saw demand outstripping supply by more than 10 times. ICICI Prudential stock has since surged 30% on the BSE.

The rush to sell shares has also been triggered by India's move last year to ease rules related to foreign holdings in insurance companies. The new rules allow foreign companies to own as much as 49% stake in local insurance ventures, up from 26%.

The insurance sector in India has been steadily expanding in recent years, driven by rising disposable incomes and improving life expectancy rates, as well as a surge in stock market. According to a report by brokerage K.R. Choksey, India's insurance industry is set to grow nearly four-fold to $280 billion by 2020.

Foreign investors have been pouring billions of dollars into India's stocks amid hopes of more economic reforms by Prime Minister Narendra Mod's government. Overseas investors pumped in $6.2 billion into local stocks so far this year. According to data from Prime Database Group, about 539 billion rupees worth of IPOs and follow-on offerings for this financial year are awaiting approval from the market regulator.

Shares of SBI were little changed in Mumbai trading, while the benchmark S&P BSE Sensex gained 0.09%.

--Dhanya Ann Thoppil

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