Shares of ICICI Prudential Life Insurance Company recovered on Tuesday after witnessing sharp selling pressure in the previous session amid concerns over a potential stake sale by U.K.-based Prudential plc. The insurance stock rose as much as 2% to ₹526.50 on the BSE, taking the company’s market capitalisation to ₹75,690 crore.

The rebound comes a day after the stock had declined 3.64% to close at ₹515.75, wiping out nearly ₹884 crore in market value. The selloff was triggered following reports that Prudential plc is likely to reduce its stake in ICICI Prudential Life to below 10%, resulting in a sale of at least around 12% stake.

According to a report by Emkay Global Financial Services, Prudential plc may sell up to 12% stake worth nearly ₹8,500 crore at the current market price.

The brokerage said the proposed divestment follows Prudential plc’s announcement that it plans to acquire a 75% controlling stake in Bharti AXA Life Insurance. Under existing regulations, Prudential would need to pare its holding in ICICI Prudential Life from around 22% currently to below 10%, the report noted.

Emkay Global said the proceeds from the divestment would be used to fund the acquisition in Bharti AXA Life Insurance, while the remaining amount would add to Prudential plc’s free surplus, implying a significant reduction in its ownership in ICICI Prudential Life.

The brokerage noted that although there are precedents of promoters holding more than 10% stakes in multiple life insurers, Prudential’s communication suggests a clear intention to reduce its holding in ICICI Prudential Life, creating a near-term liquidity overhang on the stock.

However, Emkay Global said the potential stake sale is unlikely to materially impact the insurer’s operational performance. It did, however, flag risks to ICICI Prudential Life’s exclusive bancassurance partnership with Standard Chartered Bank, which contributes an estimated 7-8% of retail annualised premium equivalent (APE).

According to the report, ICICI Bank and Standard Chartered together contribute around 25% of retail APE for ICICI Prudential Life, with ICICI Bank accounting for nearly 17-18%.

The brokerage added that Standard Chartered India’s open architecture model could help limit the impact, allowing ICICI Prudential Life to continue as one of the insurers available on the bank’s platform.

Following the recent correction in the stock, Emkay Global said valuations already reflect most adverse scenarios. The brokerage noted that ICICI Prudential Life is currently trading at 1.1x FY28 estimated price-to-embedded value (P/EV), which it believes limits downside risk.

Still, Emkay expects the stock to remain range-bound until Prudential completes the stake sale process because of the anticipated supply overhang. The brokerage maintained its “Add” rating on the stock with a March 2027 target price of ₹700.

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