While the state-owned Punjab National Bank (PNB) is in the process of selling its stake in Canara HSBC Oriental Bank of Commerce Life Insurance due to regulatory reasons, remaining shareholders Canara Bank and HSBC India are not planning to sell their stake as of now, as both the entities expect the business of the life insurance joint venture (JV) to grow going ahead.
The JV can tap the vast network of branches operated by Canara Bank, along with the synergies created by the collaboration with HSBC, Hitendra Dave, CEO of HSBC India, told reporters. He was speaking at an event where the insurer was rechristened as Canara HSBC Life Insurance.
With the PNB selling its stake in the insurer, the renaming of the company will give a better clarity to the customers, Canara Bank MD & CEO L V Prabhakar said.
“HSBC has made its views clear and we love this business, we love this company. Canara Bank has its vast network, but in a different segment and HSBC in a very niche segment. So, to the extent possible we would like to partner, but it is an independent decision of the shareholders,” he said.
On its part, Canara Bank, too, is not planning dilution of its stake in the life insurer as it believes that it can fetch better valuations going ahead, Prabhakar said.
With the core business of Canara Bank remaining strong, the lender would like to fetch higher valuations for the JV. As of March 31, the valuation of the life insurance company stood at around Rs 3,800 crore. The company has also yet posted a loss since its inception in 2008, Anuj Mathur, MD and CEO, Canara HSBC Life Insurance, said. However, the lender has not completely ruled out the option of selling its stake in the insurer.
“Canara Bank is waiting for an appropriate time where valuations are very attractive then the bank will take a call on dilution. As on date, Canara Bank will continue to remain with the subsidiary. But the option is always open. This is dilution in terms of selling to some interested party. Second option is we want every subsidiary of Canara Bank to go for an IPO, that option is also open,” Prabhakar said.
Currently, Canara HSBC Life Insurance is owned by three entities. Canara Bank is the majority shareholder at 51%, while HSBC India holds 26% and PNB holds 23% stake in the insurance company. Oriental Bank of Commerce (OBC) earlier held the stake in Canara HSBC Life Insurance, but the stake was transferred to PNB after the merger. After the government-planned merger of OBC, PNB has to dilute its stake in the life insurance company as insurance regulations do not allow a bank to hold more than 10% stake in more than one insurance company.