Shares of ICICI Lombard General Insurance Company surged 14% to Rs 1,256.70 on the BSE in intraday trade on Monday after ICICI Bank announced plans to increase its stake in the company by 4%. ICICI Bank will acquire at least a 2.5% stake out of the 4% in the above scheme by September 9, 2024. That removes a key glut for the stock.

Shares of ICICI Lombard were up 11.92% at Rs 1,220 on the NSE at 9:37 am.

The Board of Directors of ICICI Bank has approved an increase in the shareholding of ICICI Lombard in tranches of up to an additional 4% to ensure compliance with Section 19(2) of the Banking Regulation Act 1949 and the company’s participation in ICICI Lombard, a subsidiary of ICICI Bank, must obtain the necessary regulatory approvals, the exchange filing said. The bank owns 48.02% of the general insurance unit. ICICI Bank plans to acquire at least 2.5% of this 4% by September 9, 2024.

According to RBI guidelines, banks can hold less than 30% or more than 50% of insurance companies. ICICI Bank, the country’s second-largest private sector lender, had earlier sought to reduce its stake in the general insurer to below 30%. The bank had requested that the dilution be delayed until September 9, 2024, and the regulator granted the request.

ICICI Bank also informed the exchange that its board of directors has approved the reappointment of Sandeep Batra as executive director for a two-year term from December 23, 2023, to December 22, 2025, subject to RBI approval. “The board notes that the renewed two-year term falls within the five-year term previously approved by shareholders,” it said. In addition, the ICICI board re-appointed Hari Mundra, B Sriram and S Madhavan for a second term.

ICICI Lombard has returned 69.30% over the past 5 years. As a result, it underperformed the benchmark Nifty50 index which returned 74.06% over the same period.

Motilal Oswal Financial Services maintained its “buy” rating and target price of Rs 1,400.