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 for legal reasons, the remaining shareholders Canara Bank and HSBC India do not plan to sell their stake as of now. , as both entities expect the life insurance joint venture (JV) business to grow in the future.
The joint venture will be able to leverage Canara Bank’s extensive branch network along with the synergies created through the partnership with HSBC, Hitendra Dave, CEO of HSBC India, told reporters. He spoke at an event where the insurer was rebranded as Canara HSBC Life Insurance.
With the PNB selling its stake in the insurer, the company’s name change will provide greater clarity to customers, said Canara Bank MD & CEO LV Prabhakar.
“HSBC has made its views clear and we love this company, we love this company. Canara Bank has its extensive network but in a different segment and HSBC in a very niche segment. So we want to work together as far as possible, but it’s an independent decision of the shareholders,” he said.
For its part, Canara Bank also has no plans to dilute its stake in the life insurance company as it believes it can get better valuations in the future, Prabhakar said.
With Canara Bank’s core businesses remaining strong, the lender is looking to drive higher valuations for the JV. On March 31, the valuation of the life insurance company was about Rs 3,800 crore. The company has also suffered losses since its inception in 2008, said Anuj Mathur, MD and CEO, Canara HSBC Life Insurance. However, the lender does not completely rule out the possibility of selling its interest in the insurer.
“Canara Bank is waiting for an opportune moment when valuations are very attractive, then the bank will resort to dilution. On date, Canara Bank will remain with the subsidiary. But the option is always open. This is dilution in terms of selling to an interested party. The second option is that we want every subsidiary of Canara Bank to go public, that option is also open,” said Prabhakar.
Currently, Canara HSBC Life Insurance is owned by three entities. Canara Bank is the majority shareholder with 51%, while HSBC India owns 26% and PNB a 23% stake in the insurance company. Oriental Bank of Commerce (OBC) previously held the stake in Canara HSBC Life Insurance, but the stake was transferred to PNB after the merger. Following the government-planned merger of OBC, PNB has to reduce its stake in the life insurance company, as insurance regulations do not allow a bank to hold more than 10% of the shares in more than one insurance company.
