Stake sale in SBI Life done only to meet minimum public shareholding requirements- SBI

Update on the Indian Equity Market:

On Monday, NIFTY closed in the red at 9,814 (-1.6%). Top gainers in NIFTY50 were GAIL (+3.7%), Wipro (+2.6) and HCLT (+2.5%). The top losers were IndusInd Bank (-7.2%), Axis bank (-4.5%) and Tata Motors (-4.4%). The three sectoral gainers were PSU Banks (+1.4%), Media (+0.9%), and Pharma (+0.1%). The sectoral losers were Pvt bank (-3.8%), Bank (-3.6%) and Realty (-3.0%).

Edited excerpts of an interview with Mr Dinesh Kumar Khara, MD, SBI with Economic times dated 12^th June 2020:

• Stake sale in SBI Life has not been done just with the intention of shoring up capital with the bank. It is more from the point of view of meeting the minimum public shareholding (MPS) requirement. They are under commitment to offload another 2.1% by the end of September.
• The current shareholding is 60% and post divestment of another 2.10% will be at 55.50%.
• As far as the core parameters are concerned, SBI Life Insurance is doing very well. They are focusing on the protection part and that is also doing very well.
• There is no plan as of now to offload anything more than this in SBI Life for the time being.
• The insurance sector is still under-penetrated and there is a huge opportunity for a group like SBI to offer the insurance products for a large population across the length and breadth of the country. So they have a huge opportunity.
• In the ULIP space, for the last couple of years, they have started building up a sharper focus for the protection products and that is doing very well.
• For the past many years when the ULIP was getting sold since they had a larger component of ULIP on the debt side, they did not have any challenges on the debt side of the ULIP.

Consensus Estimate: (Source: market screener and investing.com websites)

• The closing price of SBI Ltd was ₹ 174/- as of 15-June-2020.  It traded at 0.7x/ 0.6x the consensus book value of ₹ 255 /280 for FY21E/22E respectively.
• The consensus price target of SBI Ltd is ₹ 272/- which trades at 1.0x the FY22E book value of ₹ 280/-

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