ICICI Lombard shares jump 14% on ICICI Bank’s stake hike plan

Shares of ICICI Lombard General Insurance rallied oer 14% upper circuit limit in opening trade on Monday, a day after the board of ICICI Bank approved raising its shareholding in the general insurance arm by 4% in multiple transactions. The share price of ICICI Bank also opened higher, in sync with the broader market, and rose 0.4% in early trade.

ICICI Lombard General Insurance shares opened 10% higher at ₹1,209.85 against the previous closing price of ₹1,099.90 on the BSE. In the first hour of trade so far, the insurance stock gained as much as 14.25% to ₹1,256.70, while the market capitalisation rose to ₹60,158 crore.

Meanwhile, ICICI Bank shares opened the day at ₹952.30 compared to Friday’s closing price of ₹950.55 on the BSE. The banking heavyweight climbed 0.75% to ₹957.75, while the m-cap stood at ₹6.69 lakh crore.

In comparison, the BSE Sensex was trading 440 points, or 0.7%, higher at 62,942 levels.  

ICICI Bank, which currently holds 48.02% stake in ICICI Lombard General Insurance, plans to acquire at least 2.5% of the 4% shares by September 9, 2024, as per the exchange filing.

The current Reserve Bank of India (RBI) permits banks to hold not more than 30% of the paid-up share capital of a company unless the company is a subsidiary of the bank. In case of a subsidiary, the bank can hold more than 50% shares in a company.  

As of March 31, 2020, ICICI Bank held 55.86% stake in the general insurance company. However, it offloaded stake in tranches over the next three years to 48.02%. In a bid to limit its exposure in the company to 30%, under Section 19(2) of the Banking Regulation Act, the bank needs to acquire a minimum of 2.5% stake before 9 September 2024. 

Earlier on March 10, 2023, the RBI had granted extension in timeline for divesting the bank’s shareholding in ICICI Lombard General Insurance Company to less than 30% of the company’s paid up capital till September 9, 2024.

The board of directors of the bank, at its meeting on Sunday, approved the appointment of Sandeep Batra as executive director of the bank for a period of five years effective from the date of approval of the RBI. The effective date of the same was from December 23, 2020.

The current tenure of Batra as executive director of the bank as per RBI approval, which was for three years, ends on December 22, 2023. The board unanimously approved the re-appointment of Batra for a further period of two years with effect from December 23, 2023 to December 22, 2025, subject to RBI approval. The board noted that this renewed term of two years is within the five years term as previously approved by the shareholders.

Besides, the board also approved re-appointment of Hari Mundra, B. Sriram, and S. Madhavan as an independent director of the bank for a second term.