India’s state-owned insurance group and investment company, Life Insurance Corporation of India (LIC) has completed the acquisition of 51 per cent controlling stake in IDBI Bank on Monday (21) 2019, making it the majority shareholder of the bank.
The deal, conceptualised in June 2018, is envisaged as a win-win situation for both IDBI Bank and LIC with an opportunity to create enormous value for shareholders, customers and employees of both entities through mutual synergies.
The transaction promises a paradigm shift for both partners, creating for the first time a unique financial conglomerate in India. LIC and IDBI Bank are two of the most trusted brands in the country. Strong together, they bring the convenience of banking and insurance services under one window for all their customers.
IDBI Bank has about 15 million retail customers and about 18,000 employees. With this deal, LIC will have a strategic investment in a large bancassurance channel, thereby increasing its productivity and reducing distribution costs. Over 800 branches of IDBI Bank can be used as touch points for selling LIC policies.
The bank will extend its cash management facility to LIC, which will help in boosting its current account balances and reduce its cost of funds. IDBI Bank will get access to a wide network of over 1,00000 employees excluding agents of LIC.
In addition, LIC employees and agents will get access to preferential and value-added banking services. customers' trust in the LIC brand will strengthen IDBI Bank's position in the industry.
The bank will significantly increase its investments in building data analytics capabilities to analyse customer behaviour of both entities. This will enable the bank to enhance its product offerings, reduce distribution cost, de-risk portfolio and support retail business build.
Retail loan portfolio for IDBI Bank has already increased from 32 per cent of overall lending in the financial year (FY) 2015 to 46 per cent in FY18 and is expected to reach 50 per cent by FY 20.
Significant revenue synergies are estimated from the partnership. IDBI Bank and LIC have started working to ensure the full realisation of their synergies over the next 12 months.
