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Premji Invest & Warbug Pincus seal the deal to buy 26 percent stake in SBI General Insurance

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Private equity firms Warbug Pincus and Premji Invest have sealed the deal to buy 26 percent stake in SBI General Insurance from Insurance Australia Group. CNBC-TV18 learns that out of the total 26 percent held by the Australian insurance company, 16.1 percent is likely to be acquired by Premji Invest and the balance 9.9 percent by Warbug Pincus.

Private equity firms Warbug Pincus and Premji Invest have sealed the deal to buy 26 percent stake in SBI General Insurance from Insurance Australia Group. CNBC-TV18 learns that out of the total 26 percent held by the Australian insurance company, 16.1 percent is likely to be acquired by Premji Invest and the balance 9.9 percent by Warbug Pincus.
State Bank of India intimating the exchanges stated that IAG has entered into definitive agreements to sell the whole of its 26 percent interest in SBI General via two transactions.
Agreements have been reached with Napean Opportunities LLP (an affiliate of Premji lnvest) to acquire a 16.01 percent interest and WP Honey Wheat lnvestment Ltd (Warburg Pincus Group) to acquire a 9.99 percent interest. The transactions are subject to regulatory processes and approvals.
IAG in its press release said that the total consideration amounts to over $640 million (Australian Dollar) based on the current exchange rate. Once both transactions are complete, this is expected to result in an increase in IAG’s regulatory capital position of more than $400 million (Australian Dollar) and a net profit after tax of over $300 million (Australian Dollar) which will be recognised in IAG’s FY20 results.
Post-transaction SBI will hold 70 percent, Premji Invest will hold 16.1 percent, Warbug Pincus will hold 9.9 percent and Axis AIF will hold 1.65 percent in SBI General Insurance. The transaction will also value SBI General Insurance at around Rs 12,000 crore or approx 6.7 times price-to-book value.
IAG’s move to sell its stake in the insurance joint venture follows a 4 percent stake sale in the insurance company by the parent State Bank of India. In September, SBI sold four percent stake in SBI General Insurance to Axis AIF and Premji Invest for Rs 482 crore.
SBI General Insurance started operations in 2010 and sells products ranging from motor, health, travel and home insurance in the retail space to aviation, fire, marine and liability insurance in the commercial space.
SBI General’s premium collection in the month of September grew by 88 percent. The average premium growth in the first half of FY20 stood at 50.8 percent. 
The company also gained market share by 60 bps in the first half of FY20 and the current share stood at 3.24 percent at the end of September 2019.
The stake sale will help in price discovery ahead of a planned Initial Public Offering (IPO) in FY21.