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PNB has agreed to buy 30% stake in MetLife India. Obvious question that comes to mind of an investor is why a public sector bank would buy stake in insurance company.
As per PNB Chairman K R Kamath, PNB wanted to enter the life insurance business in the country. PNB has a wide network across India and the bank will be marketing life insurance products to its existing clients through its network.
After the regulatory approvals, the name of company will be changed to PNB MetLife India. PNB has not shared the financial details of the transaction. PNB will emerge as biggest shareholder in the private life insurance company.
Insurance sector has been showing decent growth over the past few years. More players are expected to enter the market. The timing of PNB seems good and instead of going on its own, it seems as a better strategy to go in with partnership with MetLife India.
PNB has another benefit. The public sector bank has 60% of its branches in rural and semi-urban areas. Life Insurance market has lot of competition in metro and tier-I cities in India. Getting into semi-urban market might mean less competition for PNB MetLife India.
The move of PNB looks interesting, considering the following factors.
1. The bank already has pan India presence with focus on non metros.
2. MetLife India has been in insurance business for past few years in India.
3. Insurance Sector is showing robust growth in the country.
BSG has advised the bank for the deal. The stock was up by nearly 2% at 12.30 pm today. With a 52-week high of Rs 1395, PNB currently trades at a P/E ratio of 8.
Sharad Avasthi of SPA Securities has given a buy Call for PNB on 28th July.
SP Tulsian has also maintained a buy rating for the stock considering robust performance of the bank in recently announced results.